Some perspective on the supply, demand and price scenario
by Greg Klein
Updated March 27, 2013
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Now responsible for roughly 15% of global electricity generation, nuclear energy continues to expand. After the earthquakes and tsunami that caused Japan’s Fukushima Daiichi accident, uranium prices fell from a 2011 high of $72.63 a pound to a low of $41.25 in November 2012. More recently the price has nudged up to a March 25, 2013, level of $42.25. But countries like China, Korea and India plan to add significantly more nuclear generation, while even Japan is re-starting some of its reactors.
Cameco Corp TSX:CCO’s fourth quarter report released February 8 reiterated the company’s view that “the near-term environment for the industry was challenging but that the long-term outlook remained very positive.”
This year’s anticipated end of the Russia/U.S. highly enriched uranium (HEU) program (also known as megatons to megawatts) would remove up to 24 million pounds of annual supply from former Soviet warheads converted to fuel. But Cameco’s forecast also considered the retirement of older reactors in other countries and India’s 2020 nuclear target, which has been scaled down from 20 to 14.6 gigawatts.
As a result, Cameco stated, “While the market continues to evolve, our current estimates project nuclear generating capacity to reach about 510 gigawatts by 2022 from today’s 392 gigawatts, which represents average annual growth of 3%. Of this expected growth, approximately 64 new reactors with 64 gigawatts of generating capacity are under construction today.”
As for prices, there’s “no formal exchange for uranium as there is for other commodities,” explains the Ux Consulting Co. “Uranium price indicators are developed by a small number of private business organizations [like Ux] that independently monitor uranium market activities, including offers, bids and transactions.”
In a November 2012 interview with the Daily Crux, Sprott Global Resource Investments chairman Rick Rule said uranium prices are “irrationally depressed.” The Fukushima accident, he said, took 20 million pounds of annual uranium demand off the market while Japan placed a 15-million-pound surplus on the market. He also noted HEU’s anticipated end in 2013.
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