Uranium: Short, Long

Source: FNArena News, Andrew Nelson (9/22/09)

"RBS expects the uranium market will move into a supply deficit as soon as 2014."

Every week the uranium spot price ticks a little lower. This week it's down US$2.00 to $42.50 reports uranium market consultant TradeTech. Yet while the spot price continues to slide, the longer-term prospects for uranium continue to improve, at least in the eyes of some brokers.

In part, the brightening outlook of uranium is due to the lower levels of supply that the current tight times are causing. But as RBS points out, there is likely to be a sharp increase in demand in the years ahead as increasing nuclear consumption begins to kick in.

The single biggest problem facing the short-term market is the doubt being cast by the imminent release into the market of as much as 1,200 tons of UF6 by the US DOE by October 15. This doubt is seeing an increasing number of spot sellers deciding to take pre-emptive action and sell existing inventories before this new material finds its way into the market.

This move to lower prices has seen a number of buyers take advantage, with a total of five transactions last week totaling approximately 900,000 pounds U3O8 equivalent. TradeTech reports that active demand is made up almost entirely of discretionary buyers, with many more on the sidelines waiting for even lower prices.

This near-term price weakness stands at stark contrast to the longer-term view held by RBS, with the broker remaining bullish on the outlook for uranium over the near and medium terms. The broker notes the growth in nuclear power capacity continues to increase each year, with high construction rates being driven by China and Russia, which it expects to continue.

Compounding the benefit that this increasing demand outlook will bring is the broker's view that current logistical, statutory and operating bottlenecks in key production regions, such as Canada, Australia and Namibia, will place significant pressure on future supply plans. In fact, RBS expects the uranium market will move into a supply deficit as soon as 2014.

RBS is not only forecasting an upward trend for the term uranium price but also sees returning strength in spot uranium prices, as well.

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