Citigroup Says Uranium Glow Is Returning

Source:

"The greatest risk we see to the reactors ordered and planned is in the Western world where construction costs. . ."

Citigroup has forecast a uranium spot price of US$60/lb in 2010/11, with risk to the upside if there are further supply disruptions.

Citi's commodity team also forecast a long-term uranium price of US$25/lb, well below the term contract price of US$65/lb, as well as uranium prices of US$50/lb through to 2013.

In an analysis published Wednesday, Citicorp also predicted "a building 2012+ deficit in the uranium market as expansions/projects get delayed and secondary supplies reduce."

Meanwhile analysts Clarke Wilkins, Craig Sainsbury, Alan Heap and Alex Tonks noted that while nuclear reactors face financing and approval challenges, "demand growth through to 2015 is largely predetermined and we believe China has the potential to surprise to the upside."

"The greatest risk we see to the reactors ordered and planned is in the Western world where construction costs running into the multi billions will be difficult to finance in the post GFC [Global Financial Crisis] world," they advised. "At the very least, this will result in some reactors being delayed significantly. This is on top of the extensive permitting and approval process that will inevitably mean that the majority of the reactors are unlikely to go ahead."

"However, we see potential for China to surprise to the upside as the three biggest constraints on building a reactor-permitting, construction cost and constructive time-are significantly lower. China has proven in other industries like alumina and steel that it can build capacity at half the cost and in half the time as a typical benchmark," they noted. "China currently has 11 operating reactors, 12 in construction, 33 planned and 80 proposed."

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