Only a very small number of people trade uranium on the market. After all, there are about 440 nuclear reactors around the world, a few dozen trading firms and fuel managers, and a small number of utilities that buy uranium. It is the beginning of the process of making nuclear fuel. Without it, the nuclear reactors would stop working. Since the week of Christmas in 2000, the price of uranium has been going up and up and up, with no end in sight. Predictions range from $50 per pound to more than $100 per pound. Few people think that the spot price of uranium will go down soon.
It has turned into a fun game. The spot price of uranium is posted on the front page of the Ux Consulting website every Tuesday night (or Monday afternoon if you are a subscriber). Moments later, people start talking about the current price of uranium and where it might go next on Yahoo and other Internet chat boards. The spoiler is that TradeTech LLC tells its subscribers on Friday what the spot price of uranium is, and it tells everyone else on Sunday night. Investors have been trying to guess the spot price of uranium to bet on the price swings of their favourite junior uranium stocks (more leverage, more risk/reward). Now, you can find out from Jeff Combs, the president of Ux C, how they figure out the weekly spot price for uranium.
How does Ux Consulting come up with your weekly spot price for uranium?
Jeff Combs says: We have a pretty clear idea of what it means. We're looking for the cheapest offer we know about around the time we publish the price. Certain parameters must be met by the amount being offered. It has to be a certain amount of money in a certain amount of time. So we're not really trying to cover transactions. When a transaction takes place, it's clear that there's an offer involved. We really want to know where the market is going based on what is being offered now, not where it has been.
StockInterview: So, is your published spot price more of a prediction than a real trade?
Jeff Combs says: It's only a predictor in the sense that, if the market is working well, the next deal will probably be made at the lowest offer price. On the stock market, the lowest offer price will be taken first, but the uranium market is much less efficient than the stock market. So, we don't predict the price of the next deal. Instead, we report the lowest offer price, which shows where the sellers are in the market at that time.
StockInterview: So the spot uranium price that is published every week is not based on a real sale of uranium that took place that week?
Jeff Combs says: Since it's more about the future, the sale, or the meeting of buyer and seller, hasn't necessarily happened yet. But the price of the lowest offer shows how the market is doing at that moment. The sale price shouldn't change much, if at all, from what was offered. This is especially true when buyers don't have much negotiating power, as in a sellers' market. But this is also true in a buyer's market, where sellers try to offer a price that will make the buyer want to buy the material.
