Read on Twitter
Lost in the "are Japanese utilities selling inventory?" discussions that occur on here now and again is some nuance in the ways unit closures can affect #uranium supply without direct sales by utilities. And it applies to more than just Japan.
Nuclear utilities hold inventory in a variety of forms, equivalent to about 2 to 3 years of uranium inventory. When a utility announces a unit shutdown - esp. a permanent one - that unit's inventory (and potentially, remaining contracts) needs to get drawn down to zero.
If a utility has other surviving units, maybe that excess supply and inventory gets spread out over the future uncovered requirements of those units. If they don't, maybe the excess supply gets slotted into the remaining uncovered requirements for the marked-for-closure unit.
Producers will see reduced sales on existing contracts to these doomed units and might need to find a new home for supply destined for that unit (either cancellation or sales to recoup damages). Sometimes even, uranium can be bartered instead of cash to meet contract liabilities.
A nuclear utility left with fuel contracts or inventory but no nuclear unit has a big liability on their books and might try to liquidate the supply. This can put downward pressure on price. And it might be cheaper to simply default on extant contracts and pay damages.
Big picture:
1. Unit closures dump excess supply into holes in coverage that would otherwise necessitate buying
2. Closures can quietly return contracted supply into the market (spot or otherwise) via contract flexdown, barter, or cancellation. It doesn't require direct sales
1. Unit closures dump excess supply into holes in coverage that would otherwise necessitate buying
2. Closures can quietly return contracted supply into the market (spot or otherwise) via contract flexdown, barter, or cancellation. It doesn't require direct sales
Bottom line - a unit closure echoes. Fuel requirements might stay close to the same, but purchasing flatlines. So if you look at the unit closure situations in Japan and Germany, you don't need inventory liquidation via sales to severely disconnect uranium usage from buying.
Inventory is THE story in the uranium market.
1. Overproduction for several years
2. Reapportionment of uranium inventory after closures
3. (Potentially) Reduction of inventory levels in terms of total pounds/years of supply
1. Overproduction for several years
2. Reapportionment of uranium inventory after closures
3. (Potentially) Reduction of inventory levels in terms of total pounds/years of supply
Many folks ask how much remaining inventory there is or when buying will return en masse. I hope this wall of text provides some color and depth to this question.
There isn't *an* answer. It's dynamic. But a survival of existing nuclear units in the West is price positive here.
There isn't *an* answer. It's dynamic. But a survival of existing nuclear units in the West is price positive here.
