low demand may reduce uranium prices

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Low demand may reduce uranium prices - Australia
September 25, 2007

By Angela Macdonald-Smith

Sydney - Uranium prices might decrease 15 percent next year as demand moderated and new mines started production, the Australian Bureau of Agricultural and Resource Economics said yesterday.

The average spot price for the radioactive metal might drop to $85 (R597) a pound next year, from a $99 forecast this year, said the government's commodities forecasting agency.

It added that uranium mine production might jump 18 percent next year, on top of a 9 percent forecast rise this year.

Spot prices of uranium oxide, U3O8, reached a record $138 a pound in June, triple the price a year earlier, on rising demand from utilities and concern that supplies were limited.

Prices have since slipped about 40 percent on the indefinite closure in Japan of the world's largest nuclear power plant and a US government auction of the metal.

''World uranium consumption is forecast to remain stable in 2008 at 78 000 tons U3O8 as new generating capacity offsets the impacts of the closure of the Kashiwazaki Kariwa nuclear power plant,'' said the agency.

Consumption this year might rise 1 percent.

The bureau's forecast contrasts with the more bullish estimates from JPMorgan and Lehman Brothers. JPMorgan said last week that spot prices might climb to an average of $130 next year, from $120 this year, while Lehman Brothers forecast an increase to $115 next year, from $110 this year.

Australia's uranium output might rise 13 percent to 10 829 tons by June next year, from 9 594 tons last year, mostly due to increased production from Energy Resources of Australia's Ranger mine, the bureau said.

Export earnings might fall 15 percent to A$84.5 million (R514.7 million). Kazakhstan, Namibia and South Africa would account for most of the increase in global output this year, it said.