By John Hurst, Resourcex.com
Jun, 7th
From percolation to effervescence, the heady times of uranium prices can be expected to continue, before steadily declining in a couple of years.
The U.S. spot price currently bubbles at $138 a pound for U308.
And uranium at $200 per pound in two years? Two uranium analysts commented on June 5, “In the near term, with the market expected to remain in significant deficit in 2007-08, risk on the supply side and growing speculative interest, it is hard to see what could prevent spot prices going higher. We would not be surprised to see prices move up to around $200 a pound over the next two years.” These were Macquarie analysts Max Layton and John Moorhead, based in London and Sydney, respectively. Another seer, Neal Froneman, chief executive officer of SXR Uranium One, said the spot price could reach $250 a pound in 2008.
In the past four years, the price of uranium has erupted from a depressed low of $7 a pound to its current $138. Usage has remained stable, but resources have declined. Cameco, the world’s largest producer, had to curtail production for two years because of a flood in its best mine.
Quoting RBC Capital Markets and other banking outlets, a June 5 Macquarie estimate states that the uranium market supply deficit, which was 10,572 metric tons last year, should halve this year and narrow further next year to 3,945 tons, as supplies increase from new mines in Kazakhstan, Africa and North America. Beyond 2008, the market will probably move into surplus as supply responds to higher prices, it said.
But according a report by Bloomberg, total supply is forecast to increase by about 46 percent to 90,500 tons by 2013 from 62,192 tons in 2006. Mine supply is set to surge by 85 percent to 72,821 tons by 2013, while secondary supplies are set to fall 23 percent over the period.
Macquarie forecasts the average uranium spot price will fall to $100 a pound in 2009, $80 in 2010 and $65 in 2011, then to a longer-term average forecast of $40.
How is the price for uranium determined, especially in an era of amply demonstrated scarcity? There are two industry monitors – Ux Consulting and TradeTech. Ux editors have been reluctant in the past to disclose, in a layman’s terms, how the prices are determined.
There is no formal exchange for uranium as there is for other commodities such as gold or oil. Uranium price indicators, Ux says, are developed by a small number of private business organizations, like itself, that independently monitor uranium market activities, including offers, bids, and transactions. Such price indicators are owned by and proprietary to the business that has developed them.
The latest dispatches from major media outlets reported on June 5 that a British Columbia uranium junior, Energy Metals Corp., envisions a market capitalization of $8.2 billion, once it is sold for $1.7 billion to Toronto’s SXR Uranium One. If done, the deal would place the new entity in second place with world leader, Cameco Corp., of Saskatoon.
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