Thread by @808sandU3O8

@ChapmanScpa does some good work here with the information that is available to him. And here I am to offer my extra bit of colour. A few of my thoughts below:

#uranium

https://twitter.com/chapmanscpa/status/1565003826356273156

Firstly - Chapman identified the enrichment level of some inventory (~2%) and that BWRs are wonky. Put another way - if one were to sell material, it’s easier to sell “standard assay” in the 4.X range (esp 4.95%) and harder to sell low assay odd lots.

Secondly - it is my impression that Japanese nuclear fuel accounting uses purchase price rather than mark-to-market accounting. So generally speaking Japanese inventories contracted pre-2011 are probably MORE valuable than market and may look more valuable than they actually are.

Thirdly - and most critically - there is a lot of Japanese material on the books that has been loaned out into the market. HOWEVER, a lot of these loans are fronted by third parties and often appear to be plain sales in the market (hence media reporting of Japanese sales)…

…At some point this material needs to be returned to the Japanese utilities. And so reactor restarts, in aggregate, put pressure on the date of those loan returns. Like the carry trade unwind, the future of #uranium is in debt to “inventory raiding” of the past…

…I want to drive this point home. Inventory is about *ownership* but the physical reality is that significant uranium listed as inventory might already be in reactors, having been supplied via loans. I’m not sure if we fully understand the impact of these loans in the mid term.

Finally, inventory adequacy is a funny thing. It’s not an exact science, so whereas 4 years of inventory would be a wasteful excess to one utility, it could be below target for another. Purely psychological. And historically the Japanese are very inventory heavy.

So let me conclude with this. I think Chapman is doing a fine job squeezing information from sources that others aren’t looking at. It’s really primary source research and it’s hard. And while I disagree with his conclusions, I’ve got the benefit of having been a fuel buyer…

…The rigour of this particular piece is higher than the UTwit average, and frankly a lot of folks aren’t really asking hard questions anyway and so I’m fine with someone being curious but directionally wrong.

If I am focusing on a number right now, it’s not the 10-year treasury, it’s bond rates for BBB/A- credit. These plus a couple % are the sort of things that drive carry trade financing & provide structure to the uranium market. Absent low rates - long-term constructing dominates.

*contracting