It seems bankers working for the unlamented Lehman Brothers liked to have a slice of yellowcake with their Starbucks lattes. Among many other dodgy buys, the investment bank gone bankrupt has been found to have bought 450,000 pounds of uranium oxide, better known as yellowcake. This is not as unusual as it sounds: uranium oxide is used to power reactors not to make bombs, and has its own thriving commodity market, just like iron ore and pork bellies.
Last year, 43 million pounds of yellowcake was sold on the spot market alone. The closest thing to a threat in all this is the hope of making a killing from speculating on uranium prices. If Iran and North Korea haven’t been playing the market, it is because traders are banned from physical possession of the stuff. Only a handful of mining firms and power companies have that right. Most of Lehman’s radioactive nest egg is lying in a Canadian vault. Yellowcake was an unsung hero of the past decade’s commodity boom. Uranium prices rose over 1,000 per cent between the 1990s and 2006 — even faster than gold. The reason was an expectation of a nuclear renaissance, fuelled by China’s reactor building programme and the Indo-US N-deal.
Lehman, perhaps showing the brilliance that led to its downfall, bought the uranium when it was $55 a pound. Now yellowcake is about 15 per cent cheaper. Consider the irony: Lehman’s inheritors will be able to reap a profit from this stash only when the world has gotten over the consequences of Lehman’s collapse.