Vancouver — After hitting a new record, uranium prices are poised to go even higher as investor funds try to cash in on a rally that is already being fuelled by supply disruptions and rising demand, analysts say.
The forecast comes after investor funds bought 260,000 lbs. of uranium concentrate that was sold in a Texas auction last week, by Mestena Uranium, a small U.S. producer.
Denver, Colo.-based market analyst Trade Tech said the auction helped to send the spot price of uranium surging to a record high of US$72 per lb. on Dec. 15. That increase from US$65, the previous Friday, marked one of the biggest weekly rallies in history.
“We expect prices to keep going up,” says Gene Clark, Trade Tech’s CEO.
Eric Webb, an analyst with Georgia-based Ux Consulting, agrees.
“The market is in a very tight position,” Webb says. “Right now, all indications point to prices being under upward pressure for the next couple of years.”
The price of uranium, used to fuel nuclear power plants which generate about 16% of the world’s electricity, has increased significantly in the past year due to demand from nuclear utilities. Demand has risen faster then mine production, driving down stockpiles.
Prices have climbed from US$41 per lb. in February.
The rally has also been attributed to supply disruptions, including the recent flooding of Cameco’s (CCO-T, CCJ-N) Cigar Lake mine in Saskatchewan, which is expected to account for 17% of the world’s mine supply of uranium.
But in a year when global production is expected to come in below last year’s 108 million lbs., investor funds such as Uranium Participation Corp. and Nufcor International, are also contributing to the rise in demand.
“These are companies which set out with the intention of buying concentrates and holding for price appreciation,” Clark says.
Webb says soaring prices and forecasts of a further rally, have made some companies reluctant to offer their production under fixed price contracts in case they miss out on any future price increases.
Buyers are now having to accept contracts that require them the pay the spot price at the time of delivery, he says. This, in turn, is playing into the hands of funds who are acquiring concentrates at a price they expect will be below what buyers will pay down the road.
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