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Uranium firms remain optimistic amid low demand

Citation:The Northern Miner Date:2016-11-4 14:13:14

Uranium companies are staying upbeat given the strong long-term fundamentals for uranium, as the number of nuclear reactors around the world increase, despite the weakening uranium price and low market activity.

Year-to-date, 33.1 million lb. uranium oxide (U3O8) have changed hands on the spot market, roughly 15% less than last year. The number of deals has also dropped,  TD Securities analysts Greg Barnes and Craig Hutchison write in a late October note. The same is true for term demand.

Given the continued soft demand, the uranium spot price has plunged 46% this year to close Oct. 31 at US$18.75 per lb. U3O8, its lowest point in 12 years. Over the same time, the long-term price has fallen 18% to US$36 per lb.

The sluggish demand is due to the slow restart of Japan’s nuclear reactors, reactor shutdowns in other countries and the slowing global economy, the World Nuclear Association (WNA) reports.

Following the Fukushima nuclear disaster in 2011, Japan took their 42 nuclear reactors offline, which accounted for 10% of all the reactors in the world. Since then, Japan has restarted only three reactors.

Meanwhile, Germany closed nine of its 17 reactors since 2011, and plans to shut down its remaining reactors by 2022. In the last three years, the U.S. has closed five reactors, with another three set to retire by 2020, partly due to cheaper shale gas, the WNA states.

Despite this, the number of nuclear reactors under construction in other countries is rising, providing a bright spot for uranium in the long run.

At the end of 2015, there were 439 operable reactors around the world and another 66 reactors under construction, with a further 158 planned. Half of those reactors under construction were in East Asia, with China alone building 24 reactors.

“These are not easy days in the uranium business. Yet at Cameco, we remain optimistic. We see growth in reactor construction and consequently uranium consumption,” Tim Gitzel said on a recent conference call. Gitzel heads up Cameco (TSX: CCO; NYSE: CCJ), Canada’s largest uranium producer.