London, England — ESI-AFRICA.COM — 29 April 2011 – The fallout from Japan’s nuclear crisis will hit global demand for uranium, but it will also negatively affect future supply of the mineral, and the uranium market will remain in deficit from 2011 until 2020.
That’s according to RBC Capital Markets analysts Adam Schatzker and H Fraser Phillips who in a recently published research report predicted that uranium prices would start to recover in the second half of 2011.
They said: "Based on our forecast of available uranium supplies (mine sourced and non-mine sourced) we do not think that there is sufficient uranium to cover the needs of 2018 to 2020, and certainly not beyond that time frame.
“As a result we expect that, at some point in the next 12 to 18 months, utilities will begin to see an increasingly tight long-term contract market to the point where there is all but no supply availability. This, in our view, will be the stimulus that will cause the uranium price to recover.”
The bulk of the world’s uranium supply is purchased by power utilities on long-term contracts, and not on the spot market.
The analysts added: “The long-term price indicator has remained relatively robust – currently US$72/lb – and we anticipate that it will continue to outperform the spot market for the next 24 months. However, we do not think the current long-term price properly reflects the long-term fundamentals of the uranium industry."
The analysts said they had reduced their forecast on total uranium demand between 2011 and 2020 by about 125Mlbs from their previous estimate published on 9 March. But they had also dropped their forecast on total supply over this period by 49Mlbs, and predicted the deficit between uranium demand and supply would be more than 80Mlbs by 2020.
“We believe that the new supplies needed to fill the growing deficit will require uranium prices higher than US$80/lb in order to provide the incentive to explore for, finance and develop new projects,” they concluded.