July 31, 2010
July 28, 2010
Spot Price +$4.25 to US$46.00P/Lb
UxC said the spot uranium price has moved up sharply over the past week as market activity has picked up, especially on the buy side. UxC reported that since last Tuesday, six transactions were reported as awarded totaling about 700,000 pounds U3O8 equivalent.
As buyers stepped up to the plate posting bids to buy, sellers backed away from previous offer levels and a number of market participants have been reporting a decline in the number of new offers.
"Based on the most competitive offers of which we are aware, the Ux U3O8 Price increases to US$46.00 per pound, up US$4.25 for the week and month. This is the largest single weekly increase since the US$5 increase near the end of May last year."
UxC reported "the market again is on the move, with price increasing a total of $4.25 for the first month of the quarter. Ever since price declined in the second half of 2007, any price increases that have occurred have been short-lived, not lasting beyond six weeks."
Most of these increases have been quite sharp.
In a potentially bullish point for uranium equities, including producers and explorers, UxC is of the opinion that with the price hovering around $40 for some time, and if this continues, "at some point price increases will be more sustained, at least relative to the declines."
Source: UxC Consulting
July 27, 2010
Click Image Below For Historical Spot Prices
After nine weeks of trading within a very narrow range, TradeTech’s Uranium Spot Price Indicator jumped $2.00 this week to $43.50 per pound U3O8—nearly a five percent increase.
Utilities, intermediaries, and producers were all buyers this week. Recent equipment failures and an ongoing labor dispute have created some uncertainty for ConverDyn’s Metropolis, Illinois conversion facility, where production is not running at full capacity.
As a result, some buyers came to the market to acquire small amounts of inventory in order to forestall any impact from potential future disruptions in deliveries. In addition, the presence of producers on the buying side helped fuel the price rise.
A total of seven transactions were concluded over the course of the week. In addition, new demand emerged this week with a US utility seeking offers for just over 100 thousand pounds U3O8 contained in UF6; offers were due today.
July 26, 2010
Friday's Uranium Futures closed at US$43.15P/Lb a $1.40 rise on last weeks Uranium spot of US$41.75
July 20, 2010
.Click Image Below For Historical Spot Prices
But UxC noted that at least one deal was concluded over the past week below $41.50/lb. And while offer prices increased slightly (UxC bases its price on the most competitive offers it is aware of), that trend may not hold, UxC said. "Once the outcomes of the solicitations [to Taiwan Power and New Jersey's Public Service Electric and Gas] are known, sellers may look to market their unsold material a little more aggressively.
" Taipower is looking for up to 300,000 lb U3O8 equivalent for delivery anytime up to December 21, while PSE&G is looking for about 260,000 lb U3O8 equivalent for delivery this year. PSE&G also is seeking about 520,000 lb U3O8 equivalent to be delivered in 2011 and 2012 and up to 425 mtU per year (about 1.2 million lb U3O8 equivalent) starting in 2015. TradeTech late Friday kept its spot price indicator at $41.50/lb. Although there were signs last week that the price was softening, new demand emerged that gave some support to the price, an analyst said. TradeTech reported that one producer made a small purchase, and two US utilities quietly sought offers.
TradeTech also reported that because of a labor dispute at Honeywell's UF6 conversion plant in Metropolis, Illinois, some buyers are expressing a preference for delivery of material elsewhere. (Much of the U3O8 and UF6 that is bought and sold in the uranium market is presently in storage at licensed uranium conversion or enrichment facilities.) UxC?s broker average price, or (BAP), was $41.61/lb on July 12, down slightly from the $41.64/lb BAP on July 12.
The BAP is a daily calculated midpoint of the bids and offers reported by three brokers -- ICAP, Tullett Prebon, and MF Global, according to UxC. In the long-term market, UxC kept its long-term price at the end of June at $58/lb, and TradeTech kept its price at $60/lb.
July 18, 2010
July 17, 2010
NUCLEAR RENAISSANCE, URANIUM SHORTAGE
After a long lost decade, stretching from shortly after the Chernobyl catastrophe of 1986, to around 2003, the nuclear renaissance is in full flood: the pro-nuclear World Nuclear Association (formerly the Uranium Institute) reports that as of July 2010 at least 55 new reactors are under construction in 13 countries. Power capacity added through 2010-2020 is forecast at a minimum of about 75 GW, with other estimates extending far beyond 100 GW.
This capacity hike will increase the world's nuclear capacity, from its current "fleet" of 439 civil reactors producing about 330 GW, to around 410 - 500 GW. Due to expected fast growth of world total electricity consumption, nuclear power's share of total electricity is however unlikely to grow beyond its current approximate 15% (itself down from its share in the 1990s, of up to 18.5%), although some country plans and proposals for nuclear expansion could change this. One example is claims by some Indian nuclear energy proponents, including Indian NPCIL analysts, that India alone could develop about 400 GW of nuclear capacity by around 2040.
The pro-nuclear UxC consulting firm provides characteristically bullish forecasts for the nuclear renaissance, of world reactor numbers increasing to 568 in 42 countries with a total power capacity of 517 GW and uranium requirements rising to 120 000 tons a year, by 2020
Uranium production, stocks, supply and prices are very surely back in the minds of political and economic deciders, if not the press and media, because of simple supply/demand figures.
Taking 2009, and forecast demand for full year 2010, uranium demand for civil reactors totalled about 65 000 tons, and a forecast 68 000 tons. World mine production of uranium in 2009 was only 50 500 t (a large rise on the 43 800 t for 2008), but expected mine output in 2010 will probably not exceed 55 000 t. Actual results could be less, perhaps below 50 000 t, depending on many factors. These include the continuation of major mine expansion programmes, accident-free mine upgrading, avoidance of industrial and technology risks, economic and financial issues including the uranium price, and mine ownership struggles, and in some cases geopolitical and national security issues.
The large growth of world mine output in 2008-2009 has a single cause: Kazakhstan's determination to become N°1 world exporter. Future growth of Kazakh mine capacity and output will however be surely much less than in 2007-2009. Mine operators in world producer countries with the largest export surplus, especially Australia, Kazakhstan, Canada, Niger, Namibia are all engaged in expansion, upgrading, and development programs, as well as exploration and development. Despite this the "Big 5" suppliers , four of which do not presently utilise nuclear energy, are unlikely to achieve future rapid expansion of mine output and export supply.
The world civil reactor "fleet", excluding the world's estimated 250 research and military reactors, therefore has a uranium supply shortfall of well beyond 13 000 t in 2010, in that which concerns "fresh supplies", from mines. This shortfall is about 8 times the USA's total mine output of 2009, or more than 15 times China's total mine output in 2009, and can be compared with Kazakhstan's status of N°1 world uranium miner: its record total production in 2009 was about 13 800 t. Uranium importers face a tight supply situation, with a possible intensification of long-term undersupply, obviously able to drive prices to high or extreme levels.
URANIUM SUPPLY AND PRICES
Apart from fresh-mined uranium, usually produced as uranium nitrate, or better-known yellow colored oxide paste or concentrate ("yellow cake"), uranium supplies are simple to enumerate: stocks of uranium held by miners, power companies, reactor manufacturers, national agencies and a few other sources recycled uranium from used fuel rods, mixed with plutonium and other transuranic elements in MOX (Mixed OXide fuel), only commercially produced in France and to a small extent UK; and recycled, diluted high-activity uranium from surplus nuclear weapons of the USA and Russia, that is "Megatons to Megawatts".
Potential large scale sources of non-mine supply, of uranium or other radioactive materials able to power different types of reactors, include thorium for Canadian CANDU reactors and thorium and plutonium for India's fast breeder reactor programme, upgrading thorium to uranium-equivalent reactor fuel. These non-mine methods of producing uranium or uranium-equivalent fuels are joined by numerous proposals for novel or innovative uranium extraction processes for low grade (low uranium concentration) sources, including biochemical methods. However, technical and industrial feasibility, cost and security issues tend to limit all of these alternatives to uranium, at present. Fast breeder reactors (FBR) have a long and undistinguished history, stretching back more than 50 years, marked by extreme cost and in some cases extreme risks of catastrophic accident: outside India, current activity and interest in the FBR domain is low. Most interest relates to using future FBRs, if they are built, for disposal of nuclear wastes, not fuel production (see eg: http://www.fissilematerials.org/blog/2010/02/history_and_status_of_fas.html ).
At present, the three above cited non-mine sources of uranium are sufficient for reactor needs, but each faces large pressures limiting future supply growth or availability, reinforcing the outlook of supply shortage. Actual shortage is however unlikely to be quickly signalled by sharp price rises of downstream uranium fuel due to the number of steps or stages, and value adding, in the "fuel supply chain". This starts with upstream fresh mined uranium, moving downstream through converted or processed 'separative work units' (SWU) and 'fabricated fuel units' that is processed or enriched uranium, or MOX fuel, packed into fuel rods, calculated on a rising cost per unit weight basis. This pricing method for uranium-based fuels clearly shows the high upstream costs of SWU and the high cost of fuel fabrication (see: http://www.wise-uranium.org/nfccr.html )
Uranium shortage will however be signalled, with some delay, by price moves in the mostly company-to-company sales process for uranium. This small, unquoted, very opaque and essentially B2B uranium spot sales system, for which prices are reported by UxC and a few other sources with a delay often exceeding 1 month from transactions covered, will certainly react to uranium shortage. Supply shortage is highly probable in 2010, and therefore price spikes are very likely, this outlook being made more likely due to the large fall in prices through 2008 and 2009.
The probable coming price spike may perhaps reproduce the price spike of Q2 2007, during which 'spot' prices attained more than US $ 130 per pound, to be compared with the most recent and perhaps 'historic' price low, of around US $ 8 per pound in year 2000.
Very likely, prices will soon fall after the next price peak, as in 2007-2008, but unless new mine supply is developed the next price trough will be a short-term. This sets a certain "opportunity window" for upstream or downstream innovation, probably no larger than the next 5 - 7 years during which large scale and unlikely reductions of specific uranium needs (usually measured as pounds of fuel per reactor Megawatt-day), or unlikely large scale increase in uranium mine output, or major and unlikely reactor technology change reducing uranium's role in nuclear power must be achieved. As the WNA and reactor builders such as Toshiba-Westinghouse, KEPCO, Areva report, one ongoing major trend for uranium conservation and fuel efficiency raising, is the trend towards ever-larger unit size reactors or reactor complexes, now often 1.4 GW to 1.6 GW each reactor, and sometimes over 5 GW per complex, compared with previous technology standards, of 0.9 GW per reactor and single reactor complexes (see eg: http://www.world-nuclear.org/info/inf08.html ).
Despite efficiency raising, and mainly due to fast growth of nuclear capacity without a corresponding increase of world mined or "fresh" uranium supply, the absence of practical solutions being found will logically lead to serious and large-scale shortage of uranium. This will radically raise fuel costs despite uranium prices being only the first link in prices through the uranium fuel "value added chain". In turn this may perhaps heavily reduce the credibility and profitability of nuclear energy, which already suffers the two main handicaps of very high capital cost (usually above US $ 4000 per kW), and both short-term and long-term security risks.
The average crustal abundance of any wanted mineral or metal should always be considered with its clarke, or ratio of minimum economically and technically feasible orebody richness of the wanted metal or mineral, relative to its crustal abundance. For uranium, quite wide varying figures are given for its average crustal abundance, from around 3 ppm (parts per million) to above 4 ppm, which is about 1000 times gold's crustal abundance (about 4 parts per billion). Gold, to be sure, is not a fuel mineral and is very widely traded, but its present market price is around US $ 1200 a Troy ounce, or US $ 17 570 per pound, while uranium in July 2010 changes hands at about US $ 41 per pound.
Due to its market value, the clarke for gold is much lower than the cut-off concentration ratios needed for economically feasible uranium mining, especially where other high, or relatively high value minerals such as silver, copper, lead, zinc, cobalt, manganese are present in the orebody in extractable quantities. The clarke ratio economically feasible uranium mining, today, is generally around 70 - 250 tiles the crustal abundance of uranium. Current minima for feasible uranium extraction are around 300 ppm, or around 70 times the crustal abundance, for open pit and 'heap leach' extraction methods, and usually above 1000 ppm (0.1 %), or 250 times the crustal abundance, for economically feasible underground mining extraction.
This is the present context, set by a relatively long period (around 20 years through 1985-2005) during which uranium supply and stocks were abundant, and annual reactor orders and building fell to very low levels. Before that period, taking the period during which the 'race for the bomb' was at fever pitch, from the late 1940s to the 1970s, during the peak Cold War period, competition for uranium supplies by the present 'declared nuclear powers', the Big 5 UN Security Council permanent members, drove uranium prices expressed in dollar of 2010 buying power well above the 2007 price peak. In turn, this made uranium extraction feasible from orebodies with uranium contents as low as 100 ppm, or lower (see eg: http://fr.wikipedia.org/wiki/Extraction_de_l'uranium , or in the US 'uranium rush' http://cpluhna.nau.edu/Change/uranium.htm). At the time, gold and uranium were in several cases treated as resources of similar combined economic and strategic value, for example in South Africa (see eg: http://www.datas.ch/article.php?id=445 )
Uranium at low to very low concentrations is naturally found in many types of rocks and minerals including coal, fly ash, shale, sandstones, granite, and to be sure, in even lower concentration (about 1000 time less), in seawater. Naturally occurring uranium concentrations typically occur after geochemical changes including action by acid and basic chemical agents, such as pyrites, hydrogen sulfide acting to slow or stop its solubilization. This naturally occurring uranium is typical insoluble, and thus stable, but is often made easily soluble by oxidation and complexing with phosphates, carbonates or sulfates. In very general terms, concentrations of uranium in mine rocks such as copper mine rocks can extend up to about 40 ppm. To be sure, extraction of uranium from such low concentrations is energy and chemicals intensive, and can only be costly.
To be sure, world mined gold production exhibits 'classic' geological depletion expressed as rising extraction costs and energy intensity, and a large recourse to reworking mining wastes and tailings from orebodies having submarginal clarkes at prevailing previous market prices for gold. Despite this, driven by fast rising gold prices, little or no expansion of total annual gold supply is occurring: current mine output is around 2 450 t per year. The outlook for uranium mining is similar, with a potential recourse to orebodies of low concentration, as the market price rises, reducing the clarke ratio for feasible prospects.
Uranium demand for the world's present reactor 'fleet', as already noted will be about 68 000 t in 2010, and by 2020 the annual uranium requirement could attain 120 000 t.
The present context, of current 2010 uranium requirements being about 68 000 t, with the annual requirement perhaps rising as high as 120 000 t by 2020, has no previous precedent except that of the 'early nuclear age' and Cold War period, referred to above, during which the nuclear industry shifted uncertainly from military-only to military-and-civil. During that period uranium need made the question of price relatively unimportant. Estimates for uranium prices (comparable U235/U238 grade to "yellow cake") during the 1950s, in dollars of 2010 buying power, easily extend beyond US $ 250 a pound. W can conclude that price spikes to these levels are very unlikely in the short-term 2010-2011 period, but a tripling of the 'spot' price from the current July 2010 level is far from impossible.
July 15, 2010
Over the past
Today, I encourage you to throw another fuel source onto the watch list... uranium. China is making big ripples in this commodity market as well. Here's why...To meet its growing electricity demand, China plans to build 60 new nuclear reactors within the next 10 years. China's high-growth cousin, India, needs 40 new reactors in the next 20 years. That would increase the number of nuclear Power Plants
Looking at the past 10 years in uranium, it's easy to see why China is stockpiling.
Uranium enjoyed a huge rise from 2002 to 2007. This rise attracted a tremendous amount of speculation, which ended badly when it fell from $140 per pound to around $40 per pound. This is a "blown-out" commodity that should get contrarians interested.Here's another reason to be interested: While we have an impending explosion of demand from Asia, the industry's best mine hasn't opened due to calamitous problems, which I told you back in Nov, 2006.According to RBC Capital Markets,
I suggest watching this trend and waiting for a bit of price strength to assert itself. I want to see the train pick up some momentum before getting on board. The 200-day moving average
written by veteran market traders.
Jordan is talking with Areva of France and Mitsubishi of Japan, among other companies, to acquire the technology required to build the Hashemite kingdom's first nuclear power generating plant.
Earlier this month, the United Arab Emirates, which is the Arab state furthest down the path of developing nuclear energy, issued licenses to the Emirates Nuclear Energy Corp. to start preparing a site for a nuclear power facility. In December, the Emirates awarded a South Korean consortium a $20.4 billion contract to build and operate four 1,400-megawatt nuclear power plants.
All told, 13 Middle Eastern states, including Egypt, have announced plans -- or dusted off old plans -- to build nuclear power stations since 2006.
This is causing unease in Washington even though they have all declared that their objective is to boost electricity generation to meet a rapidly growing demand.
"Oil producers are burning up reserves simply to keep pace with power demand that is growing by 7 to 8 percent every year in some (Persian) Gulf states," the Financial Times observed.
All say they have no intention of seeking to develop nuclear weapons. But there is concern that once they've mastered the technology they'll seek to counter Iran's alleged push to acquire such weapons by doing so themselves.
"The region looks around and they find all the non-Arabs have a nuclear program or are on their way," Mustafa Alani of the Gulf Research Center in Dubai told the Financial Times. "They look at India, Pakistan, Israel and now Iran."
"There's a feeling this region made a mistake when they opted for zero nuclear energy for the last 40 years and the Iranian program was a wake-up call. The intention is civilian but you need the know-how at least."
Lurking behind this rationale is a general, and seemingly growing, sense that U.S. President Barack Obama's administration is unable or unwilling to take on Iran over its contentious nuclear program.
The Sunni-led Arab states, those in the gulf in particular, see Shiite-dominated Iran determined to become the regional colossus and without the conviction of U.S. protection, they feel extremely vulnerable and exposed.
Saudi Arabia's King Abdallah, "fears that his country's historically closest ally is naive, and dangerously so, for putting so much faith in diplomacy," says British analyst Simon Henderson, an expert on Saudi Arabia with the Washington Institute for Near East Policy.
"Despite the official blandishments, there are clear indications that under Abdallah, and especially since 2001, Saudi Arabia has put distance into its relationship with the United States ...
"On Iran, there is a widening if not unbridgeable gap between the two countries," Henderson noted in a June 28 analysis.
"The kingdom's own pursuit of (peaceful) nuclear energy is a clear sign that Riyadh thinks that the United States cannot or will not stop Iran's program."
The Americans have sought to ensure that none of the Arab states will seek to enrich uranium to weapons-grade level.
But in June, David Cox, assigned by Riyadh to evaluate the economic and technical feasibility of Saudi involvement in all stages of the nuclear cycle, was quoted as saying the Saudis would want to be involved in as many stages of the nuclear power cycle as possible.
"Enrichment could happen there and the same with mining uranium," said Cox, president for energy at the British branch of Poyry, a Finnish management consultancy.
"That mirrors the Iranian stance," Henderson noted, "though the ability to make low-enriched uranium for power plants is but for a few technical tweaks, the same technology needed to make highly enriched uranium for an atomic weapon."
Washington will be uneasy with the Saudis opting for French nuclear assistance rather than American, which would have made surveillance of Saudi enrichment easier.
The Obama administration endorsed the Emirates' contract with the South Koreans only after Abu Dhabi pledged to refrain from enriching uranium -- the process that's at the crux of the dispute with Tehran.
But Washington is at odds with longtime ally Jordan because it plans to exploit large uranium deposits it recently discovered in the desert. The Americans see that as a proliferation risk.
July 13, 2010
Russia, which holds about a tenth of the world's uranium reserves, is aiming to be a major supplier to the Indian nuclear power industry. The two countries have decided to work on the creation of a joint venture for geological exploration and production of uranium.
Currently, India produces only about 450 metric tonnes of uranium. Given the recent announcements of construction of new nuclear power plants, which is second only to China, India is keen to source regular supplies at low prices. The country's annual uranium requirement is expected to jump by an additional 1,500-2,000 tonnes. Analysts have said that India's nuclear market is set to grow to around $40 billion by 2020. But firm prices could play spoil the party.
A newswire agency report had indicated that worldwide demand for uranium was eroding stockpiles and would result in prices rising to $55 a pound next year. Adam Schatzker, a metals analyst at RBC in Toronto, and Max Layton, at Macquarie Bank Ltd in London, had also forecast that uranium prices were set to climb to $56.25 next year, and $60 in five years.
Though nowhere close to the record $136 a pound registered in July 2007, India is keen to ensure that it has assured supplies of uranium to provide fuel for nuclear reactors, that will generate energy to drive its ensuing economic boom.
The country has 14 nuclear power plants that are used for peaceful purposes. But these contribute only 4% a year to the country's electricity needs. Plans are afoot for a massive increase in atomic power generation aimed at reducing the country's reliance on polluting fossil fuels.
Seeking to buy uranium, government officials in India recently had several meetings with their business counterparts in Canada and Australia. The previous Liberal government in Australia had received international standard safeguard agreements from India and thus had cleared the way for uranium sales. However, this year, major uranium exporter Australia, has refused to sell uranium to India unless it signs the Nuclear Non-Proliferation Treaty. Despite the setback, several other countries are eager to breast the tape.
In September 2008, a three-decade ban on nuclear supplies to India was lifted, following which the government signed civil nuclear agreements with several countries. In Africa, Gabon has said that it was not averse to supplying uranium to India and was willing to enter into a commercial transaction. The Indian government is said to be studying the possibility of reciprocating by enhancing its civil and military cooperation with Gabon. India has already signed agreements with USA, France, Russia and Kazakhstan to supply uranium. Of these, France has already completed its supply, whereas part supplies have been received from Russia, a top government official said. Now, the country is evaluating picking up stake in one of the world's largest uranium fields in Russia.
Russia's state-owned mining firm, ARMZ Uranium Holding Company, has the licence to the Elkon field. A stake was offered to India in the course of bilateral negotiations during the Russian Prime Minister Vladimir Putin's visit to India earlier this year. The possibility of a minority equity stake in the Elkon field in Russia's Yakutia province, which is estimated to hold 344,000 tonnes of uranium or about 5.3% of the world's recoverable reserves, is being seen by analysts as a step by India towards securing long-term supplies.
Confirming the trend, an official in India's foreign ministry said: ``India plans to grow its stockpiles of uranium in anticipation of a nuclear plant building boom. This is set to have a direct implication on uranium price targets and supply-demand fundamentals.''
Not so long ago, Russia had entered into an agreement to supply 2,000 tonnes of nuclear fuel to India. The Russian state-owned firm TVEL Corporation was deputed to supply about 210 tonnes of uranium during 2010-11. Sources indicated that during the last fiscal, about 120 tonnes of natural uranium and 58 tonnes of enriched uranium were received from Russia.
Last month, India also signed a civil nuclear pact with Canada, which would enable the South Asian nation to secure uranium at a set price. Cameco, one of the world's largest uranium miners, has said that Canada could soon be exporting 2,000 tonnes of uranium to India annually.
``India does not have a domestic uranium supply that is capable of supporting its expansion plans. Our agreement will give us the opportunity to serve this market,'' Cameco director Lyle Krahn has been quoted as saying. Cameco, which is based in Saskatoon, is also setting up an office in Hyderabad.
Not that the country is only interested in imports. India is also looking at buying out uranium reserves. State-owned aluminium major, Nalco, has identified mineral assets in Chile, Namibia and Indonesia. ``We have zeroed in on three mining reserves and are considering floating special purpose vehicles in the countries concerned for the acquisition,'' Nalco director, B L Bagra, told reporters recently.
In a bid to secure raw material to run its diversified portfolio, the aluminium producer has been scouting for uranium, bauxite, coal and copper reserves outside India. Nalco has identified a bauxite mine in Chile, a copper mine in Namibia and a coal block in Indonesia. For uranium assets overseas, the company is to team up with the Nuclear Power Corporation of India, with whom it already has a joint venture to set up nuclear power plants.
India is also expected to produce indigenous uranium to feed its existing and upcoming reactors in the near future. Earlier, an Indian firm had discovered high grade uranium 600 km from Bangalore, at Gogi village in Gulbarga district. It was touted as the highest value uranium deposit found outside Canada and Australia. Relentless exploration for 12-years by the Hyderabad-based Atomic Minerals Directorate for Exploration and Research found large traces of the rare mineral.
Several Indian firms too have invested in uranium fields. Back in 2008, Jindal Steel & Power (Mauritius) Ltd, bought the entire stake in a uranium asset in Mongolia, which was jointly owned by Canadian firms Bluerock Resources and Uranerz Energy Corp, for $2.6 million. Mongolia has about 2% of the world's uranium reserves.
Another small Mumbai-based firm, Taurian Resources, bagged exclusive rights for the exploration and mining of uranium in the Arlit region of Niger, which is the fifth largest supplier of uranium globally. The initial foray into Niger's uranium mining industry has had other Indian firms lining up.
India expects to have 12 new reactors running by 2020, consuming an extra 1,500 tonnes of uranium per year. With India reportedly leading the biggest atomic expansion since the decade after the 1970's oil crisis, the country's high-powered efforts could well pay off, ensuring guaranteed uranium supply.
July 12, 2010
July 11, 2010, 8:42 PM EDT
July 12 (Bloomberg) -- China is buying unprecedented amounts of uranium, signaling that prices are poised to rebound after three years of declines.
The nation may purchase about 5,000 metric tons this year, more than twice as much as it consumes, building stockpiles for new reactors, according to Thomas Neff, a physicist and uranium- industry analyst at the Massachusetts Institute of Technology in Cambridge. Prices will jump by about 32 percent next year, the most since 2006, RBC Capital Markets said.
India and China are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies growing more than twice as fast as Europe and North America. The boom, combined with slowing supply growth, may benefit Cameco Corp., a co-owner of the world’s largest uranium mine, and Areva SA, the largest builder of reactors.
“China’s demand is insatiable,” said Dave Dai, an analyst at the Daiwa Institute of Research in Hong Kong. “They will have to take almost whatever is available.”
Uranium will climb to an average $55 a pound next year as demand erodes supplies, according to Adam Schatzker, a metals analyst at RBC in Toronto. Max Layton, at Macquarie Bank Ltd. in London, forecasts it will climb to $56.25 next year and $60 in five years.
Uranium for immediate delivery was at $41.75 a pound on July 5, according to the Ux Consulting Co. weekly price assessment. Spot trades of uranium oxide totaled 20.9 million pounds this year, about $873 million in today’s prices, Roswell, Georgia-based Ux Consulting said.
Uranium has tumbled 69 percent since peaking at $136 a pound in July 2007 as companies boosted production, according to the firm’s data. At least 27 mines in nine countries began operating in the past 10 years, adding as much as 65 million pounds a year to global output, according to Saskatoon, Saskatchewan-based Cameco, part owner of McArthur River mine in Canada, the world’s largest deposit of high-grade uranium. Six mines are scheduled to start in 2010.
“The uranium bull market of 2006 and 2007 stimulated the development of new supply, but we do not think it is enough,” Schatzker wrote in a report. “The prevailing uranium price is too low to stimulate sufficient supply to cover future reactor requirements.”
The cost of mining one pound of uranium is about $31, up from $26 in 2007, according to Edward Sterck, an analyst at BMO Capital Markets in London.
‘Stockpiling Like Crazy’
China’s demand for uranium may rise to 20,000 tons a year by 2020, more than a third of the 50,572 tons mined globally last year, as it boosts output to 85 gigawatts, nine times its current capacity, according to the World Nuclear Association. The nation agreed on June 24 to buy more than 10,000 tons over 10 years from Cameco.
India’s needs will grow 10-fold to 8,000 tons as it quadruples capacity to 20 gigawatts, according to Jagdeep Ghai, finance director at state-owned Nuclear Power Corp.
“They are essentially stockpiling in anticipation of new reactor build,” Neff, who is an independent director of GoviEx Uranium Inc., a privately held exploration company with interests in Niger, said in a July 6 telephone interview. “They are stockpiling like crazy.”
China plans at least 60 new reactors by 2020, Xu Yuming, executive director of the China Nuclear Energy Association, said in Beijing on July 6. The average 1,000-megawatt reactor costs about $3 billion, according to the World Nuclear Association. Loading a new reactor requires about 400 tons of uranium to start, Neff said.
Areva, Cameco, Paladin
China’s economy may grow 10.1 percent this year, while India’s expands 8.6 percent, according to analysts’ forecasts compiled by Bloomberg. U.S. gross domestic product will increase 3.1 percent and Europe’s will grow 1.1 percent.
Companies that build reactors may be among the biggest beneficiaries. Areva’s shares have tumbled 53 percent in the past three years. Miners including such as Cameco, whose stock has fallen 60 percent since then, Perth, Australia-based Paladin Energy Ltd., which has lost 63 percent, and Darwin-based Energy Resources of Australia Ltd., which is down 25 percent, may also benefit.
“Longer-term it does look as though there’s going to be a shortfall of uranium and ERA and Paladin should benefit from higher prices if that plays out,” said Lyndon Fagan, a Royal Bank of Scotland Group Plc analyst in Sydney.
Chinese Premier Wen Jiabao aims to cut pollution by reducing energy consumption 20 percent in the five years through 2010. The country pumped 6.5 billion tons of carbon dioxide into the atmosphere last year, U.S. Department of Energy data show, more than any other nation. Atomic plants produce virtually no greenhouse gases, though spent fuel remains radioactive for thousands of years and requires re-processing and storage.
China National Nuclear Corp., the nation’s first operator of reactors, said on June 28 it’s exploring for the fuel in Niger, Namibia, Zimbabwe and Mongolia.
“We’re just beginning to see the initial stages of China going abroad to buy stakes in uranium mines, but this is a trend we’re going to see more and more in the future,” said Stephen Kidd, head of strategy and research at the World Nuclear Association in London.
Growing uranium use may create a shortfall by the second half of this decade because not enough new production is planned, according to Friedel Aul, director of fuel services at Nukem Gmbh, an Alzenau, Germany-based uranium trader and broker.
“Current production is based on mines that have been in operation for a long, long time,” he said. “With startup costs, certainly to bring a mine on line today is much more expensive than it was 10, 15 years ago.”
Production growth, including supplies recycled from Russian warheads under an agreement ending in 2013, may slow to 4.8 percent this year and 3.4 percent in 2011, according to RBC. It increased almost 12 percent last year.
The last time this many reactors were planned was in the 1980s, after the 1973 and 1979 oil shocks prompted the Organization of Petroleum Exporting Countries to boost prices for crude. By 2015, a new reactor may start every five days, compared with an average of one every 17 days during the 1980s, according to the World Nuclear Association.
Commissioning new plants is a “game-changer” for uranium, said Mark Pervan, head of commodity research at Australia and New Zealand Banking Group Ltd. in Melbourne. Though many won’t come on line for as long as two years, “speculative interest” may drive prices to the “$60 to $80 range pretty quickly.”
Prices may recover as demand improves, said Dustin Garrow, a Denver-based executive general manager of marketing for Paladin, the world’s ninth-largest uranium producer.
“We see demand picking up noticeably and it is not just the Chinese, there are other utility consumers that are now showing interest,” Garrow said in a July 6 interview. “We could start to see fairly substantial price increases in the spot market later this year.”
July 3, 2010
In 2009 production was as follows:
In situ leach (ISL) 36%