Uranium Sector Overview


"Despite ongoing short-term market impacts from Fukushima, uranium's long-term fundamentals are sound, with strong and increasing demand for new nuclear power reactors."

The sector has faced near-term uranium price uncertainty since the March nuclear crisis in Japan, as well as broader systemic equity market concerns over slow U.S. economic activity and ongoing sovereign debt issues in the advanced economies. However, sector outlook is expected to improve and buying opportunities emerge late Q411-Q112 as the anticipated surplus utility disposals materialize and are priced into the market, and investors refocus on mid- to long-term sector fundamentals.

The dynamics driving the near-term sector outlook remain dominated by the aftermath of Fukushima, including Germany's decision to close reactors. The spot market, which has been trading in the range of US$50-60/lb, is expected to come under renewed downward pressure in coming months. The fund implied price (FIP), an indicator of market price expectations looking out 3 to 6 months, points to a spot price of US$45.95/lb, reflecting expectations of potential new supply to enter the market Q411 from producers, funds and uncertainty over the extent of potential Japanese and German utility surplus dispositions.

The long-term contract uranium price is relatively stable, and is currently US$64.50/lb (31 August), down from US$68.00/lb (31 May) and US$73.00/lb (28 Feb).

Despite the ongoing short-term market impacts from Fukushima, the long-term uranium market fundamentals are considered sound, with expected strong and increasing demand for new nuclear power reactors, especially from China, the U.S., Russia, Ukraine and India. While Germany has announced it will close all 17 of its nuclear power reactors by 2022 (with seven to remain closed with effect from the March 2011 moratorium), many countries have publicly stated their strong continued commitment to nuclear energy, most notably, and arguably of greatest influence, the U.S.

Over 84 new nuclear power reactors are expected to be commissioned globally by 2017, with 63 currently under construction (or almost so). There are 496 new reactors planned or proposed as at 1 September (WNA). -View full report

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