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Supply squeeze would boost uranium prices

By Tom Stundza -- Purchasing, 3/12/2009 6:11:00 AM

A severe uranium supply crunch could occur in coming years, according to Jerry Grandey, CEO of uranium producer Cameco Corp., as producers cut back investments in the current recession.

Grandey told the Reuters Global Mining and Steel Summit in New York that industrywide cutbacks in uranium capacity development projects despite solid demand and uncertainty about Russia's plans for its decommissioned nuclear arsenal all portend accelerated future supply woes which could impact uranium prices.

Grandey says the resurgence of nuclear power as a non-greenhouse gas producing alternative to fossil fuel generation already has caused the uranium industry's mined output to lag consumption. He says global mined output is 115 million lbs/year, compared with consumption of about 180 million lbs--which he expects to grow 2-3% annually in coming years.

“I think the financial crisis is clearly impacting the ability of every supplier to raise capital,” Grandey says, according to Reuters. “When you see project cancellations, you see expansion derail, you see some projects that will just go slower. That is just simply taking away future supply and sowing the seeds of the next spike in the uranium price.”

As reported by Purchasing.com, spot uranium averaged $87/lb in 2008. Actually, transaction uranium prices have roller-coastered from a low of $7/lb in 2000 to a high of $136 in 2007 and back down to $43.50 on Wednesday. Still, metals analysts see $93/lb as a possible 2009 average