Jeffrey Christian, managing director at New York City-based commodity consultancy CPM Group, says that the recent sharp decline in the uranium spot price is part of the general collapse of asset prices. However the spot price is now too low, and will readjust back in the short term (during 2009-2010) to US$60-65 per lb. uranium oxide.
In the medium term (2010-2013) prices will settle at a US$60-90 per lb. range. He estimates that this is the market-clearing price range in a situation of finely-balanced supply and demand.
However, looking beyond 2013, Christian forecasts that prices could go much higher, to US$130 and more. There are two catalysts that could push prices that high: firstly, a large number of new reactors are going to be built, creating a steady increase in demand; and secondly, the agreement that Russia signed to supply uranium to the U.S. runs out in 2013, and Christian believes that it will not be renewed, and that Russia will stockpile the material and use it domestically rather than export it to foreign utilities.
Christian believes that the expansion of BHP Billiton‘s (BHP-N, BLT-L) Olympic Dam mine in Australia will go ahead. He is far less certain on Cigar Lake mine in Saskatchewan, calling the situation there “a gigantic question mark.” Despite the uncertainty, he believes that Cameco (CCO-T, CCJ-N) will probably find a way to bring the mine to production, although a time frame is difficult to estimate.
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