Uranium is a remarkably difficult commodity market to get a handle on. The mine to consumption chain is complicated and long, with lead times of up to 2 years. Utilities are also conservative, meaning the price today is more likely to be about the view of the market in a couple years time rather than today.
There are readily available information on reactor build outs, but actual consumption of enriched uranium is largely inferred. When thinking about miners, we then back this back to assumptions about U308, which is the initial product produced before it is enriched for use in reactors.
One of the key inputs in determining U308 usage is the cost of enrichment, which is defined as a Separative Work Unit, or SWU. This is important to U308 consumption as it determines how much you use to obtain a certain amount of enriched uranium
One way to think about it is squeezing an orange to get juice. The harder you squeeze it, the more juice you will get. But lets assume there is some cost in the unit of effort to squeeze the orange. If oranges are cheap but your effort is expensive, you are likely to not squeeze out every drop of juice from the orange given diminishing returns of effort. There will be some optimal point where you leave some juice in a squeezed orange to start on a fresh one.
The importance for U308 demand is that if the cost of enrichment falls, then it becomes cheaper to apply more effort to get the same amount of enriched uranium from less U308. And this is precisely what has happened over the last 12 months, with the SWU price falling from $138 to $119.
The drop in the SWU price is a bad sign that demand for enriched uranium is weakening. But this has a real affect on demand for U308, as utilities would require just under 3% less U308 for the same amount of enriched material if everything is priced at spot (although this isn't always the case.)
So falling SWU is not just a bad signal, it has a material impact on U308 demand. While prices may not weaken much further from current levels of ~$44/lb, its hard to be positive on a 12 month view.
