Forecasting uranium demand is relatively easy compared to other commodities, as reactors are used for base load power supply with little variation in operating rates, and the long construction times allow demand to be forecast well into next decade. Something often overlooked though is the lead time for getting the yellowcake through the conversion and enrichment process into the fuel rods that are used by the reactors. If you are looking to start up a reactor in 2015 (likely to be still in the planned status at the moment) you would need to have the fuel rods on site by 2014 given the operating risk that they represent if not available. A 1 GW reactor requires the equivalent of 2m/lbs of yellowcake to be on site for start-up. The key constraint in the system at the moment is getting the material through the conversion and enrichment process. Industry sources that we have spoken to suggest this could take up to 3 years. Given you would probably not want to disrupt the market by trying to buy all the material at once and forcing the price higher, you would normally look to buy the material over a number of years. The key conclusion of this analysis is that even reactors only planned for startup mid next decade need to be assessingI how they will source their uranium over the next couple of years.
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