Uranium Prices Remain Below Cost of Production, Recovery is Years Away

Uranium prices continue to hover at an eleven-year low, with the commodity’s collapse to the price weeks ago failing to inspire any renewed buying interest, and according to a recent forecast from UBS, a turnaround in the market could be years off.

UBS analysts recently revised their average spot uranium prices for the years ahead, and all of these revisions were downward. For 2016 the forecast is now $30/lb. down from $37/lb., for 2017 they cut the forecast to $32/ lb. from $55/lb., for 2018 to $42/lb. from $60/ lb.,and for 2019 to $55/lb. from $60.

The reason behind the languishing prices, and why UBS expects the tough times to continue, is that fact that Japanese reactor restarts have been much slower than expected, while the pace of nuclear expansion across the globe has also disappointed. This does not mean that the uranium sector is dead forever. UBS believes what other uranium market forecasters have been saying, that the market will heat up in the future thanks to increased demand from China. There are 21 reactors currently under construction in China, 42 in the planning stage and a further 170 planned. This compares to the 444 reactors currently in operation. Clearly, over the long-run, uranium demand will increase from China.

In the meantime, uranium stockpiles remain high enough to meet a great deal of the current demand, while China and Africa continue to boost production; and in the near-term this will also pressure prices. So far in July there have been very few uranium transactions and the spot price is around $26.40 per lb. Right now the marginal cost or production is around $30 per lb.; therefore, many uranium miners are currently underwater.

Donald is a strategist for economiccalendar.com. He specializes in a fundamental approach while informing traders of relevant economic data. Actively trading since university, Donald trades indices and commodities. He earned his Bachelor's in Finance from Baruch College's Zicklin School of Business in New York City.