All Things Uranium: Japan and the Big Reddit Squeeze
Matthew Gordon talks to Brandon Munro, Uranium Expert and CEO of Bannerman Resources.
- Japan being back in the headlines, with nuclear energy described as “essential” if the country has a hope of hitting its net neutral by 2050 pledge.
- The latest “uranium squeeze” group that has popped up on Reddit.
This article contains a transcript excerpt from Brandon Munro #42 - It’s Raining Cash as the Uranium Squeeze is on. Who’s with us?
Matthew Gordon: “I saw a press release where the Minister of Energy stated that nuclear energy is important to the future energy supply in Japan. We've had a few mixed messages. They've been slightly distracted by other things, but finally, someone has said it out in the open."
Brandon Munro: "He's gone a lot further than that. In fact, he said that it is vital and essential, if Japan is going to be able to achieve its net neutral targets by 2050. Until now, particularly during Abe's administration, the Japanese government were saying it's an important part of their energy mix. They want 22% of their energy coming from nuclear. There are 17 reactors to be turned on, they'd have to build a couple, but now the language is really strengthened. It's almost like giving the Japanese people an ultimatum: either you let us increase the share of nuclear or we won't be able to achieve [the 2050 target]. The timing is good if that is his objective because it comes off this crisis that they had with energy where they came very close to rolling blackouts across a lot of the country in the middle of winter.
Japan has also had a free-kick on emissions since Fukushima. The rest of the world have been very critical of any other countries that haven’t decreased their emissions, yet Japan have been allowed to dodge the rules. Japan's emissions have gone up since Fukushima. Their balance of payments have blown out as a deficit for the first time in 35-years. For a long time, they were saved by the fact that spot LNG prices were low. Now, all of a sudden emissions do count and they're starting to realize that the maths simply doesn't add up for Japan. It's not particularly suited to renewables. It doesn't have a lot of land area so they certainly know the cost of solar in terms of cannibalization of other land uses. They're very protective of their natural environment so they're not going to go damming a whole lot to create an additional hydro, so they really need nuclear power. Now they can trade it off against the good feeling that they'll get for finally doing what they need to in terms of global emissions."
Matthew Gordon: "That's great news, and it's in line with what we're hearing from other countries around the world. Countries have been setting their targets for 2030 or 2050. It's certainly something we're seeing being driven by the EV sector. It's all good news. I think we're going to be seeing a lot more stories like this and we'll be discussing the ramifications of it, certainly in the context of energy."
Brandon Munro: "And as you say, there are lots of mini stories bubbling away. Another one that we don't need to discuss, but people should tag and log is that for the first time, a town council has given approval to reactors being extended beyond their initial 40-year operating life. It's only 2 reactors: the Takahama 1 and 2, and they're not going to turn on yet. They still need the governor to approve it, but nonetheless, these are little mini-wins that will add up. It's an evolving story to watch."
Matthew Gordon: "We're a bit late on the Reddit front though. There's already a Uranium Reddit group. We missed the boat. They've got 700 people in there as of now. I'm sure more will come flooding in as the stories get conflated with other information, as the Uranium Market probably is positioned as 10 x bigger than it actually is. I think there's a whole bunch of reasons why people will make money and lose money in that group. It's a phenomenon at the moment."
Brandon Munro: "Unfortunately, the Uranium Market isn't set up for a Reddit-style Uranium squeeze. I'll give an example: if you and I were deciding that we were about to create a Reddit squeeze on the Uranium sector, it would be quite fun but it does hold a few moral implications for us both."
Matthew Gordon: "I would just follow their model which has already been laid out, through which you just talk utter shit aggressively enough for the unthinking, the followers who can't be bothered doing too much work. It seems to work for enough people to get that momentum going. I think you could create all sorts of scenarios about the possibilities for Uranium. None of them need to be true, and bingo - you got yourself a little Uranium squeeze going on there. The great thing about Uranium space is it isn't very big."
Brandon Munro: "No, it's not, but the problem with your current strategy is that all that you create there is a bit of demand pressure on a handful of stocks. You wouldn't actually create a squeeze as such. Even if you had a whole lot of spotty kids putting their stimmy cheques into buying some of the New York Stock Exchange-listed Uranium stocks, it might go up 20%. It might go up 50%, but you're not going to create that fundamental distortion, which is what the squeeze is all about. The smallest increments that I've seen that you can buy Uranium for as a financial speculator is 100,000lbs of Uranium and there's a couple of groups who would open an account for you. That's USD$3M worth.
Maybe what they need to do is set up a GoFundMe page or a Kickstarter and say, we're going to raise the USD$3M to buy 1Mlbs worth of Uranium and once we hit that target, we're going to put it all in 1 day or something and move the thing to the moon. And as it starts getting closer to their target it might start to create the anticipation that there will be a squeeze, and if you start to see people really jump on it, and instead of hitting a 30M target, they hit a 60M target, then will have 2Mlbs worth of Uranium. Who knows? Maybe that would be enough, but it still lacks that political element to it. It's not really going to mess up Wall Street, and who wants to beat up the poor utilities are producing clean energy day in day out? There's no real victim that needs to be beaten, tortured and bullied here. That's the problem that I've got with it. But if you want to talk about market manipulation, it's laid out for Wall Street, and Wall Street can squeeze the Uranium by the proverbial very easily with a couple of hedge funds throwing a couple of hundred million dollars at the problem. They can put money into Yellow Cake and UPC and they can buy physical that really moves this market creating a bunch of different virtuous cycles that we've talked about in the spot market."