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On Friday, industry consultant TradeTech LLC announced it had raised its weekly uranium spot price indicator by $3 to $55 per pound in step with what it calls “robust demand” in the uranium market.

Since bottoming at its lowest level in over three years in April ($40 per pound), the price of yellow cake has been slowly but steadily rising as demand for energy commodities in general increases across the globe and utilities companies seek partnerships with uranium miners.

“Uranium has moved up in line with energy commodities” over the last two months, said Glyn Lawcock, head of resources research at UBS AG in Sydney. “The price got beaten up earlier this year because people needed to generate cash, but things have calmed down.”

Despite recent gains, the spot price still remains 60 per cent below June 2007’s record price of $138 per pound.

The industry’s other major consultant, Ux Consulting, has raised its weekly price indicator by only $1 to $54 per pound. Both firms have kept their longer term price at $65 per pound.

IAEA Symposium: Increasing Global Uranium Demand

The word out of the International Atomic Energy Agency ‘s (IAEA) International Symposium on Uranium Raw Material for the Nuclear Fuel Cycle taking place this week in Vienna, is that the demand for uranium from energy hungry nations is growing.

Currently, 436 nuclear reactors are in operation around the globe and account for 15 per cent of the world’s electricity production, according to the World Nuclear Association.

The worldwide recession has somewhat slowed new reactor construction projects, but longer-term demand, especially out of China and India, is expected to pick up again between 2015 and 2020, said Chaitanyamoy Ganguly, head of the IAEA’s nuclear fuel cycle and materials department.

“It will definitely pick up tempo after this recession is over,” he added. Over 60 of the agency’s member countries are seeking guidance in starting their own nuclear power programs and constructing their first plant. The IAEA says its anticipating increased interest as energy security and carbon emissions issues are pushed to the forefront of governmental policy decisions.  

The demand for nuclear fuel is outpacing above ground supply and placing pressure on the uranium mining industry to step up exploration operations and mine development.

Utilities companies, especially in Asia and Europe, are experiencing pressure of their own as competition to secure supply lines heats up, pushing many to aggressively pursue partnerships with, or stakes in, uranium miners.

“We are in a time of buoyant activity for the uranium production cycle,” commented Yury Sokolov, IAEA Deputy Director General and Head of the Department of Nuclear Energy. “It must be said that whilst the world may be in a period of economic recession, the levels of activity in the uranium mining business seem to be continuing unabated – at least for the larger producer companies and countries.”

Increase in Indentified Resources Likely

While uranium production is expected to fall short of demand by 2015, identified minable uranium resources are projected to increase 10 to 15 per cent this year spurred by renewed interest in the uranium market.

Currently, uranium production accounts for less than two-thirds of annual demand and the rest is made up for the most part by U.S. and Russian stockpiles from a program that will end in 2013. The supply shortfall is also based on the belief that demand out of Asia and the Middle East as been largely underestimated, said Sebastien de Montessus, Areva’s director of mining business.

In 2007, the amount of economically viable identified uranium resources worldwide was estimated at 5.5 million tonnes, according to the Nuclear Energy Agency in Paris and the IAEA.

Ganguly and others expect this number to rise this year based on mining industry efforts in Australia, Canada, India and Russia. “From the trend based on the (symposium) presentations … you’ll see at least a 10-15 per cent rise [in 2009] in identified resources,” he said. “In Australia, in Russia, in Canada, all the presentations that we have heard so far, there is an upward trend.”

However, an increase in identified resources below the ground this year does not equal a rise in above ground supply adequate enough to meet current rising demand. Bringing an identified uranium deposit through the exploration and development stages into production can take as much as 10 years or longer.

And many in the industry are saying uranium spot prices still remain too low for miners to take on the heavy costs of bringing new projects into production presently.

“Producers around the world need to see some signs of higher spot prices over the next few months to press the button for new projects,” said De Montessus. The spot price needs to hit around $70 to $80 a pound, he added.

Hence, regardless of a potential rise in identified uranium resources, worldwide uranium supply/demand fundamentals will remain bullish and contribute to further gains in the spot price over the long-term.

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