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« EXTRACT RESOURCES APPOINTS JONATHAN LESLIE AS CEO | Main | First Uranium Corporation Up 36.15% Today »
Sunday
Feb282010

Uranium Market Outlook – First Quarter 2010

RBC Capital Markets Logo 01 March 2010.JPG



RBC Capital Markets recently released this forecast for the Uranium Market covering the demand, supply and price forecasts for uranium going out to 2019. The price is estimated to peak at $80/lb in three years time before dropping back to $60/lb in 2019.

Demand
• We foresee uranium demand growing by an average of 4.4% per year during the next 20 years, slightly lower than our previous forecast, but weighted to the 2018-2025 timeframe. The increase in demand is driven mostly by China as we expect it will lead the world in new reactor builds over the next two decades.
• Announcements continue to be made by governments and companies around the world regarding potential new nuclear plants. We believe this trend will continue as nuclear power is seen as a clean alternative for baseload generation. In the West, the expansion of existing reactor fleets has been much slower than anticipated due to the global recession
coupled with permitting delays and other government-related issues.


Supply
• We forecast the supply of uranium to grow by an average of 5% annually until 2015, but falling thereafter as reserves are exhausted. The uranium bull market of 2006 and 2007 stimulated the development of new supply, but we do not think it is enough. In our opinion, the prevailing uranium price is too low to stimulate sufficient supply to cover future reactor requirements.
• We have made two significant changes to our supply forecast: (1) we have reduced the forecast output of new Kazakh mines due to technical problems that we believe will persist; and, (2) we have moved the start year for Cigar Lake to 2013, one year later than we had previously forecast.


Market Balance
• We are forecasting deficits for every year from 2010, onward. Much of the demand we are forecasting has discretionary timing and, therefore, the market price will likely not directly reflect our view as purchases can be deferred (but not indefinitely).
• We believe there is not enough uranium production, either current or planned, to satisfy reactor needs, initial core requirements and inventories for new reactors. A sustainably higher price should help resolve this gap.
• Since the bull market for uranium in 2006-2007, we have seen a very strong supply response, in particular from Africa and Kazakhstan. Coincident to this, we have seen a substantial number of new reactor builds started globally. However, the uranium demand from these new reactors has not yet impacted the market which has resulted in a spot market that is oversupplied which has led to a low price.

Price Forecasts
• We have made no changes to our uranium price forecast.
2006A - $48
2007A - $99
2008A - $63
2009E - $46
2010E - $50
2011E - $60
2012E - $75
2013E - $80
2014E - $80
2015E - $80
2016E - $70
2017E - $70
2018E - $60
2019E - $60


Risks to Forecast
• Any major problem with a nuclear reactor could quickly curtail new reactor builds and reduce demand.
• Technical or regulatory problems could reduce mine supply.
• Material owned by speculators and investors could temporarily flood the market.

So there you have one groups opinion on just what the future holds.


All the best.

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Reader Comments (2)

According to Cameco Cigar Lake will be up and running this coming October. This can only further suppress the price. 4% growth is terrible . The price is more or less flat until 2015. Unless hedge funds decide to get involved it will stay that way. The USA is set to decommision hundreds of nuclear war heads, just recently announced.This market is going nowhere that I can see. Can anyone tell me otherwise ?

March 2, 2010 | Unregistered Commenteruranium bug

What do you guys think of ESO Uranium? ESO-V

March 8, 2010 | Unregistered CommenterMax

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