In view of recent declines in commodity markets in general, and the uranium market in particular, securities analysts have updated their market forecasts.
According to a Bloomberg report, JPMorgan Chase analysts have lowered their price projections for the next two years. The spot price target for 2009 has been lowered by 14% to US$64.75 per lb. uranium oxide, while the target for 2010 has been lowered by 4.7% to US$71.50. The long term price forecast is unchanged at US$65.
Citigroup analysts Alan Heap and Alex Tonks say that the supply / demand balance in the uranium market is set to remain tight for the next few years. Despite retaining a positive outlook on the market, they have reduced their price forecasts. Citigroup sees increasing nuclear power use, particularly in Russia, China and India. Based on projects that are under construction or planned, nuclear generating capacity are projected to increase by 140 gigawatt, or 37%, from 373 gigawatt. There are currently 439 reactors in operation around the world, with 36 under construction, 99 planned and 232 proposed.
Citigroup estimates mine production this year at 40,500 tonnes uranium, while consumption is estimated at 72,000 tonnes. Next year, mine production will rise to 44,000 tonnes, and consumption to 73,000 tonnes. In 2010, mine production will rise further to 49,000 tonnes, while consumption is projected at 73,500 tonnes.
Citigroup expects to see meaningful new mine production coming into the market only after 2010, from projects such as Olympic Dam, while the timing for a start-up of Cigar Lake mine remains uncertain.
Citigroup’s price targets are US$60 per lb. uranium oxide in 2009, US$80 in 2010, US$60 in 2011, US$50 in 2012 and US$25 long term.
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