RBC Analyst: Low Uranium Prices Could Turn Away Investors

If low uranium prices persist, investors may turn tail from the industry jeopardizing important future exploration and development, says RBC Capital analyst Adam Schatzker.

In our opinion, the current spot market price level will likely have far reaching implications if it remains at such low levels for too long, most importantly, in our view,  will be disinterested equity markets that might cease funding uranium exploration and development.

We believe that the absence of equity market participation in the uranium industry would constrain the ability of uranium supply to meet the growing demand, which, in turn, could threaten the ability of global utilities' new reactor build programs.

Adam Schatzker's comments were in reaction to recent trade data that has spot prices for uranium ranging between $57 to $59. Mr. Schatzker said he believes the demand side of the spot market continues to be the weak link, but noted buyers seem content with buying at ever decreasing prices.

Surprisingly, spot volumes are on track to reach the 30 million pound mark for 2008 - a level not seen since 2006 - and may do most of that volume at falling prices. 

Over at Canaccord Adams, analyst Scott Finlay said lower-than-expected prices in Q1 and Q2 have wreaked havoc on his U308 forecasts, forcing him to reduce price assumptions through 2011. Still, Mr. Finlay's new $69 price assumption for 2008 remains 16% higher than the current spot price and his 2009 forecast of $80 is 35% higher.

He wrote:

In the absence of a supply shock, our base case foresees a supply/demand balance over the next two years and a return to surplus in 2011.

The analyst added that uranium prices will begin strengthening following the quiet summer period and into 2009 on the back of new buying from utilities.

Comments

[paulk8756]

So, then, what might happen if the U.S. would resume the licensing of domestic nucler reactors? Would this impact the market significantly?

[Cameco Jr.]

This seems a bit slipshod, or worse disingenuous, on the part of RBC Capital. Less than 10% of the uranium sold goes out on the spot market. Term contracts continue to remain in the $90 range. This is coming from the mouths of Cameco and other uranium miners. If the spot market is such a small component of uranium sales overall, why such a focus on it by the analysts?

[titans]

i've noticed over the past few months that it's always RBC making these negative comments about the uranium sector.this is the first article that an analysts has put a name to the story in a long time.seems like to me that RBC is shorting the uranium sector or partical companies as well.you have hard working people out there busting their butts trying to better the company and then these people come along with a nasty agenda trying to knock the value of their company down; where's their morals ??? RBC is just looking out for their own interest and the hell with everybody else !!!

[fero]

That is exactly right 54066 , once they knock prices down ,then they will buy cheap shares of uranium companies to make even more money.

[M33]

It was only couple of weeks ago Goldman sachs was suggesting the spot uranium is only 5% of the market, RBC needs to explain why they choose to follow spot rather then contract prices ???

[JET1C]

So what. Nuclear power in the US is dead. They say that, even if it was begun today, it would be more than 20 years before an new Nuclear power plant even began startup procedures.

The tree huggers and the NIMBY's have made nuclear power an impossibility in this country. Let's just not even talk about it and get on with the development of Wind power, Solar, Cellulose ethanol and fuel cell technology.

This talk of nuclear power is just obscuring what is really important.

[titans]

need to see what the new president said yesterday about nuclear power taking off the the u.s. once he becomes elected !!!

[hb1]

National wealth will continue to slide without a cheap source of energy. Oil prices are high because we are not using the cheapest carbon-free energy source we have - Uranium. It's been stalled for 30 years! Fourth generation nuclear reactor technology now burns down the fuel to low radioactive waste that only need 300 years of storage to decay completely. Fuelcells to power cars ultimately need electricity to split the water into hydrogen and oxygen. That's were Nuclear Power comes in. Uranium is simply traded on the NYMEX market. We don't need the Middle East or OPEC or another war here. Thinking about nuclear waste? Check out this article from Engineering news
www.engineeringnews.co...

Regarding RBC and others, I also suspect its just market manipulation and shorting by the big players. Their is demand for the Uranium commodity. See article at www.world-nuclear-news... on "India choked by nuclear fuel shortage"

[titans]

the next president is on CNBC in 30 mins. discussing how the u.s. will be headed in a nuclear direction when he becomes elected.the uranium companies from australia & canada will be getting added positive news with this interview.a final analogy btw. oil & uranium.this is hard to believe but it's true.what it costs China for "1" day of oil @ $120 PER BARREL,that same amout of money would produce enough energy to last China for "a whole year" ; that's right, "1" full year of energy using nuclear.Both China & India will be buying uranium on the open market & the price will rocket for an extended period of time; can you say lower oil prices !!!

[the omega]

I like this stock: this blog writes goo darticles too:
psychologyofthecall.bl.../