Commodities | Jun 29 2007
By Chris Shaw
The Australian uranium sector has certainly lost some of the exuberance it enjoyed earlier this year and during 2006 as Resource Capital Research points out the sector’s market value has increased just 5% in the past month, compared to 31% over the past three months and 175% over the past year.
The slowdown in performance comes amid some expectations in the market spot uranium prices could actually come down a little in coming weeks, which would mark the first reversal in official prices since early 2003.
Resource Capital Research doesn’t agree with such an outlook though, suggesting forward indicators actually support further gains in spot prices. On its estimates uranium should trade as high as US$148 per pound in the near-term and continue until reaching US$165 per pound by September of next year.
This compares to a current spot price of US$138 per pound (on TradeTech figures), up from US$95 per pound three months ago and US$65.50 six months ago.
Driving the group’s positive outlook is ongoing strength in the likely underlying demand for uranium as it is increasingly being considered as an alternative power source. The group points out as at May 31 (and using World Nuclear Association figures) there were 265 planned and proposed nuclear reactors in the global pipeline, which is up from 222 as at January 29th this year.
Putting this increase in potential demand in perspective, the group notes there were only 153 planned and proposed reactors being considered 12 months ago, so it suggests the scope for demand to continue to grow significantly is a pointer to ongoing strength in uranium prices.
