Supply being unable to keep pace with increasing demand represents good news for uranium producers and explorers owing to strengthening prices.
Demand shows no signs of slowing as many countries look for cleaner energy alternatives while the continuing urbanization of China and India means the need for more energy in these countries.
Nuclear power is seen by many as a solution to both these demand factors and the result is tremendous growth in the nuclear power industry.
Uranium prices have been somewhat slow to recover from the Global Financial Crisis which also saw a dramatic decrease in uranium exploration. The flow-on effect has been a shortage of uranium and this shortfall is unlikely to be met in the short term.
Prices have been increasing steadily this year and with the shortfall in supply starting to bite the industry harder, there appears to be significant likelihood of further spot price rises.
Marmota Energy’s chairman Bob Kennedy reflected these thoughts in his address at the company’s recent annual general meeting. “In very simple terms, the world now faces an environment where it is consuming more uranium than it produces, and looking out to 2018, the global shortfall is expected to be around 400 million pounds annually.
“Australian uranium developers should be looking now to bring on a pipeline of uranium mines to maximize their potential to service that supply weakness.”
The quarterly Uranium Exploration and Development Company Review released by Resource Capital Research also supports these views.
It states that the uranium spot price is US$60/lb, up 25% from US$48/lb in September and nearly 50% higher from US$40.75/lb in June. It says the recent price surge has been driven by Chinese buying as well as some constraints to mine supply. The long-term contract uranium price is US$65/lb, up from US$60/lb three months ago.
The report says that as of November 2010, there are 479 new nuclear reactors planned or proposed globally with many in China and India, where the governments, and people, are not only wanting more power, but increasingly looking to cleaner sources than coal or oil. Currently there are 441 nuclear power stations in operation and 58 under construction. A total of 84 of the 479 new reactors are scheduled to be commissioned by 2017.
It says that market confidence has increased in the growth outlook for Chinese reactor build following recent MOUs and long term sales agreements announced by the Chinese with Kazatomprom, Areva, Cameco and Paladin.