Spot Uranium Falls Again

Source:

...RBC Capital Markets analysts believe that "the demand side of the uranium spot market continues to be the weak link, but buyers continue to exercise discretion and seem happy to buy at ever decreasing prices. Surprisingly, spot volumes are on track to reach the 30m pound mark for 2008 - a level not seen since 2006 - and may do most of that volume at falling prices..."

Uranium oxide (U3O8) prices have fallen once again over the past week, this time marginally on a week-on-week basis, but maintaining a trend now in place for a year, and to a price level last seen late in 2006. Specialist trade entities Ux Consulting reported spot prices falling this week to $57/lb, while TradeTech reported $59/lb.

Thinly traded uranium futures prices are also falling. The spot uranium price has more than halved after peaking around $138/lb in June 2007. In the past few years, as uranium spot prices rushed upwards to the 2007 peak blow off from lows of around $10/lb, an investor mania spurred the virtual explosion of numbers of would-be uranium companies. The demand side was seen as an irresistible story, with global energy requirements pushing utilities to seek alternatives to conventional power plants, and switching heavily into nuclear choices.

Quoted stock prices of uranium stocks, mainly the dozens found in the developer and explorer category, have fallen massively. In reaction to this week's further fall in uranium prices, specialist analysts at RBC Capital Markets said that current spot market price levels "will likely have far reaching implications if it remains at such low levels for too long.

"Most importantly" RBCCM continued, "in our view, will be disinterested equity markets that might cease funding uranium exploration and development. We believe that the absence of equity market participation in the uranium industry would constrain the ability of uranium supply to meet the growing demand, which, in turn, could threaten the ability of global utilities' new reactor build programs".

RBCCM analysts also believe that "the demand side of the uranium spot market continues to be the weak link, but buyers continue to exercise discretion and seem happy to buy at ever decreasing prices. Surprisingly, spot volumes are on track to reach the 30m pound mark for 2008 - a level not seen since 2006 - and may do most of that volume at falling prices. We continue to think that the $55/lb level will offer some support, but admittedly that value seems to have more emotional support in the industry as opposed to fundamental support".

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