Uranium Price to Remain Below 2007, 2008 Averages, JBWere Says

By Angela Macdonald-Smith

April 8 (Bloomberg) -- Average uranium spot prices may remain lower than the past two years until at least 2014 because of increased mine production and sufficient supplies from decommissioned weapons, Goldman Sachs JBWere Pty said.

Prices may average $42.85 a pound this year, 31 percent lower than in 2008 and less than half the 2007 average, the Melbourne-based securities firm said in an April 7 report. Prices may climb 5 percent next year to $45, then to $50 in 2011.

The spot price for uranium oxide concentrate, used in nuclear-reactor fuel, fell 1.8 percent to $41.75 a pound last week, Denver-based pricing service TradeTech LLC said April 5. Prices have dropped from a record of $138 a pound in June 2007 as investors sell inventories and world economic growth slows.

“We believe the market will remain comfortably supplied in the medium term,” analysts led by Melbourne-based Malcolm Southwood said in the report. “We are increasingly of the view that the dramatic price surge in 2006 and 2007 was anomalous.”

Southwood didn’t give the firm’s previous forecasts for spot prices and couldn’t be reached by telephone today.

Global mined uranium production may increase by 7 percent a year on average between 2008 and 2013 because of new projects in Kazakhstan, Canada and elsewhere, even as some investments are slowed, the analysts said. Cameco Corp., the world’s biggest uranium producer, Paladin Energy Ltd. and Uranium One Inc. are among companies building or expanding mines.

Goldman Sachs JBWere’s price forecasts through 2010 are lower than downgraded estimates published by JPMorgan Chase & Co. in a separate April 7 report. Spot prices may average $47.20 a pound this year, 17 percent lower than earlier forecast, while 2010 prices may average $49.80, a 6 percent reduction, analysts led by Melbourne-based David George said.

The downgrades reflect “the drop in spot activity as a result of the liquidation of spot uranium positions, primarily by financial players” late last year, the JPMorgan analysts said. They maintained their long-term forecast for prices at $65 a pound, citing “emerging uranium supply constraints.”

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net