SINGAPORE, March 27 (Reuters) - Uranium prices are closing in on $100 a lb -- a 10-fold increase in five years -- and prices could climb sharply higher yet as more governments embrace atomic energy despite dwindling supplies of yellow cake to power the reactors.
The spot price for uranium jumped $4 to $95 a lb, according to weekly report from UxC, a leading publisher of uranium prices, a big leap from $60 in December and from around $9.50 in late 2002.
Years of under-investment in uranium mining caused by moribund prices and the anti-nuclear lobby has left the world short of the material used to fuel nuclear reactors.
"The environment is primed for a nuclear renaissance. People are focusing so much on supply-side issues that they are forgeting that this is a demand story and the big expansion of new-build programmes hasn't kicked off yet," Joel Crane, an analyst at Deutsche Bank in Melbourne, said.
With concerns of another Chernobyl-like radioactive leak and worries that enriched uranium will get into the hands of those keener to make weapons than fuel, there is still considerable opposition to nuclear energy.
But governments in Europe, United States, Russia and China and even environmental groups, including Greenspirit, are warming up to nuclear power because it is viewed as producing less greenhouse gases than fossil fuels.
Now industry is scrambling to meet the renewed demand, which is putting pressure on prices. Some see uranium surging another $50 a lb, and well above the 1970s high, when nuclear energy was last in vogue.
"In inflation-adjusted terms, the 1970s peak in uranium prices was at $120 a lb. Given the weaker dollar, strong demand and limited supply, we could see it peak at over $150," said Paul Carter, managing director of Argonaut Securities in Perth, Western Australia.
"Demand for the physical is driving the prices, but weakness in the dollar means people are willing to pay a little more in other currencies."
There are 435 nuclear reactors operating around the world, with a further 28 reactors under construction, 64 planned, and another 158 proposed. India, with seven new plants, and China, with five, are leading the charge into nuclear energy.
With prices moving higher, developers of reactors coming on stream in the next five to seven are looking to lock in prices right now for their "first fills" of uranium.
"All these first fills need to happen, and other reactors are running closer to capacity -- nearer 90 percent from maybe 70 percent -- which means increased fuel burn," Carter said.
A new reactor takes a first fill of uranium of around 600 tonnes, then consumes 200 tonnes per year.
In 2006, uranium production was an estimated 103 million lbs, or 46,720 tonnes, while consumption was 177,000 lbs, or just over 80,000 tonnes.
This year, uranium demand is expected at about 183 million lbs and production is expected at about 117 million, said Alice Wong, a vice president at Cameco Corp. "Since 1985 uranium consumption has exceeded mine production and you can see it increasing by wider margins. So you're looking at 20 years, or better, of consumption exceeding mine production," Wong said.
That difference has been met by utility stockpiles and from scrapped atomic weapons, but a treaty between Russia and the United States to convert weapons-grade material to low-enriched reactor fuel expires in six years.
"The big deal between Russia and the U.S. ends in 2013 and it is not quite clear what is going to happen after that," Steve Kidd, a director of World Nuclear Association in London, said.
Kidd was relatively sanguine about pressure on fuel supplies for reactors: "The market will be supplied one way or another but the question is at what price."
But Australian and New Zealand Bank analyst Andrew Harrington believes the falling supply from decommissioned weapons is big issue.
"The reduction in secondary supply will only get worse and the shortfall is unlikely to be met by capacity expansions," he said.
The timing for when the market will come back into balance will depend much on Australia and whether they will allow the opening of new mines.
Australia holds 40 percent of the world's uranium reserves and exports are allowed from parts of the country but not from mineral-rich Western Australia or Queensland under a policy that has its roots in the anti-nuclear movement of the 1970s.
New supplies could come Africa, led by Namibia, and in Canada, where Cameco's Cigar Lake project was expected to be in full production in 2012 producing 18 million lb of uranium annually. But it now faces delays from flooding.
"The timetable for the Cigar Lake start-up is little optimistic. It's pretty much underwater and it may be difficult to get it up by 2010." Argonaut's Carter said.
It takes some 10 to years or more to bring a mine into production, so there are few signs tightness in the market will ease anytime soon. (Additional reporting by Anna Stablum in London and Susan Taylor in Ottawa)
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