Dwindling stockpiles boost cost of uranium
Daily Herald Reports, Posted 1/9/2005
Prices for uranium, used to generate 16 percent of the world's electricity, may rise 25 percent this year as stockpiles dwindle and demand rises in China and India.
"You have gone from a buyers to a sellers' market," said Bob Mitchell, who holds physical uranium worth more than $26 million for Adit Capital Management in Portland, Ore.
Commercial stockpiles dropped 50 percent between 1985 and 2003 because mine output couldn't keep up with demand, according to a September report by the Massachusetts Institute of Technology. Mine expansions may not meet demand, boosting prices for miners such as Cameco Corp., the world's biggest, and Energy Resources of Australia.
Cameco shares rose 68 percent last year and Energy Resources surged 94 percent. Paladin Resources, an Australian company that plans to mine in Namibia, rose ninefold.
China is preparing to award an $8 billion contract to build four reactors. The country plans to build 27 plants to meet a target of boosting nuclear energy output fivefold by 2020. India aims to build 17 reactors to triple capacity by 2012.
Spot prices of uranium rose to $20.50 a pound as of Dec. 31, according to Metal Bulletin. That's the highest since 1984.
Contract prices paid by power companies may rise to $27 a pound this year from $20 a pound last year, National Bank Financial analyst Ian Howat said in a Nov. 24 report.
"It looks like current prices are here to stay and possibly rise significantly," Craig Kinnell, acting chief executive of Energy Resources of Australia, the world's third-biggest uranium miner, said. "Inventories are falling and there has been little response to that in the way of more mine supply. Our contract prices have risen to reflect the spot price rises."
The decline in stockpiles has been hastened by the decision of Russia, the world's biggest uranium exporter after Canada, in October 2003 to limit its exports to conserve fuel for 25 plants it wants to build by 2020.
Fund manager Tim Barker at BT Financial Group in Sydney said potential increases in supply from dismantled nuclear weapons makes it hard to tell the extent of supply shortages.
Reactor fuel made from former Russian nuclear weapons powers one out of every 10 U.S. homes, according to the Nuclear Energy Institute.
"We've ... have heard stockpiles are running down so many times I've lost count," said Barker, who helps manage $30 billion. "I'm not sure the ultimate size is very well known. I suspect there's a fair amount of self-interest in the information that's available." |
