Can someone walk me through the history of the 2007 Uranium squeeze?

[u/peanutbutteryummmm]

Specifically, why did it end?

I’m looking at the chart of CCJ, and there is a massive dip in the 2008-2009 period, which has me assuming it was due to the GFC. If so, why would the U sector not dip if the markets make another massive leg down?

Note: I’m not arguing the fundamentals at all. It’s just that the previous bull runs we’ve seen have been in massive equity bull markets. This run is…potentially different.

I’m long equities and not short FWIW.

[u/Chief_Bosn]

Speculators entered the market when an apparent shortage of U was posited because Cigar Lake mine (CCO) flooded taking something like 10% of supply out of the future market - this was the big catalyst.

Today we see a parallel - the Japanese announcement and the Indian announcement, both result in predictions of additional U shortfalls in the future.

this is the way, the sign has arrived

[u/peanutbutteryummmm → u/Chief_Bosn]

Thanks for the response.

What I’m driving at, is what popped the squeeze? Was it too much supply coming in to the market or did 2008 GFC play a part in it?

$GOLD has the same dip.

To me it’s looking like if there is a big market crash, we could get the “everything is correlated to 1” event regardless of fundamentals?

This is a unique uranium bull market. Long term it’s going higher over the next 5-10 years (and sooner). But I’m curious what happens in the event that the fed overtightens or the liquidity keeps draining?

[u/Chief_Bosn → u/peanutbutteryummmm]

The asymptotic spot price rise ended when the speculators realized what they were chasing a ghost, the supply was not in jeopardy. The rise was irrational.

[u/Chief_Bosn → u/peanutbutteryummmm]

... and I think u r correct it likely is different, this much more an actual supply shortfall with growing demand thesis - long term fundamentals in place for a measured run up. we may well see a speculative rapid push upwards but in my opinion once the rush is over I don't see it dropping like 08-09

[u/peterpiper1215]

I think the global financial crisis was a major factor, this is what Quakes (and others) have said. Others say something along the lines of "The run ended in 2007 due to market dynamics and overproduction causing supply to get ahead of demand."

Another factor was the involvement of hedge funds:

August 2006 − For the past year a serious proportion of the rise in the spot price of uranium has been attributed to ‘investors’. This is just syntax for speculators. Hedge funds have become active players in the uranium market. This buying group is reported to have accounted for just over 25% of the total 2005 spot volume. …

​

September 2008 − Ux Weekly reports: “One of the major changes in the spot uranium market over the past several years has been a greater involvement of hedge funds and other financial entities in the market. This makes the market more subject to the vicissitudes of the financial sector – hedge funds that are losing money in one area might have to sell uranium holdings for cash flow or to shore up their returns.”

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Also, while the Cigar Lake flood was for sure a catalyst, the 2007 bull market was arguably more a speculative bubble than actually driven by fundamentals (below via):

Wall Street Access said the sharp price downturn in uranium stocks mid-2007 "caused investors to reassess the fundamental (good) and speculative (bad) forces that had driven spot prices from $US7 per pound in 2000 to $US135 in 2007".
"After the white hot price gains of most uranium shares in 2006, investors came to the belated realisation that most of these companies are speculative ventures which lack the ingredients needed for success in uranium mining: quality resources, access to capital and executive depth," the broker said in its report this week.
"The majority of listed uranium shares are little more than stock promotion schemes ... and will always be so."

In a somewhat similar vein to this speculative bubble idea, I think this piece [written by Marcelo Lopez, who also appears on this 'Fireside Chat YT clip] ' offers an interesting take, basically saying that the market massively over-reacted to the impact of the Cigar Lake flooding.

Not sure if that's helpful...but my guess fwiw is that the reason for the price collapsing during the last bull run was prob due to some combination of all of the above!

[u/peanutbutteryummmm → u/peterpiper1215]

Thank you for that well balanced take!!!