Uranium price will rebound: analysts (Part 7)

Deutche Bank analysts Paul Young and Joel Crane issued a research report on uranium in June, before the recent meltdown in financial and commodity markets. This makes their report outdated, especially in view of the sea change in the economic landscape since June. Nevertheless, their conclusions are relevant.

Young and Crane say: “We believe that the world is on the verge of a uranium renaissance, and in our opinion, the financial markets continue to underestimate the potential for a rapid increase in uranium demand.”

The two analysts believe that increased demand, coupled with continued supply issues, will drive prices higher. In line with International Energy Agency scenarios, they assume that 1,000 more nuclear reactors could be built by 2050 a substantial increase over the existing base of 439 reactors — a highly aggressive projection.

If this proves accurate, the implications for the uranium market are profound, but even if only half this number, or 500 more reactors, are to be constructed by 2050, uranium demand will receive a sizable boost. Meanwhile, a projection by the two Deutche Bank analysts that 79 more reactors could be in operation by 2015 seems more realistic, but even this number may prove to be an over-estimate.

They project that mine supply in 2010 will be 52,000 tonnes uranium, while reactor demand will be 66,000 tonnes. On the basis of the ambitious scenario by the International Energy Agnecy, calling for 1,000-plus new reactors, Crane and Young calculate that by 2050 uranium demand could increase from 2008 levels by between 215% (to 243,000 tonnes uranium per year) and 290% (to 300,000 tonnes uranium per year.).

The analysts project a 17% hike in uranium demand between 2010 and 2015. Their post-2015 scenario has mines possibly scrambling to meet the increased demand from the higher number of reactors. They say: “We believe that supply could struggle to respond to the potential increase in uranium demand between 2010 and 2050.”

Although they project a slight surplus of 2.8 million lbs. in 2009, they believe that supply issues will persist because of production shortfalls. They further forecast an increased reliance on mine supply and less reliance on stockpiles and decommissioned nuclear weapons.

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