Uranium Prices Continue to Descend as Year-End Approaches

As the year comes to a close, uranium prices continue feel pressure and have recently touched a 13-year low, defying expectations that after five years of collapsing prices that 2016 would be the year things started to turn around.

Uranium prices collapsed in the aftermath of the Fukushima nuclear disaster, but bullishness remained over the long term prospects of the nuclear sector due to the large amount of nuclear plants under construction. Currently, there are about 60 nuclear plants under construction with many more planned while many existing plants are undergoing upgrades. This will most definitely boost nuclear demand even though it is taking a longer time than expected for the uranium market to see increased demand and a recovery in prices.

As 2015 came to a close analysts were cautiously optimistic over the outlook for uranium prices for 2016. But the year ended up being a disappointment. Analysts have acknowledged that it is taking longer than expected for uranium to recover; and are now forecasting flat prices in 2017. The major challenge for the uranium market is oversupply, which followed the fact that Fukushima took 50 plus reactors out of commission, destroying the short-term market fundamentals.

Looking longer down the road the current market situation could result in another major bull run in prices. While the demand picture should drastically improve, the production cutbacks and decrease in exploration spending that has resulted from the collapse in prices will mean lower supplies, creating a recipe for a major jump on prices. The wild card is; however, how long it will take for this fundamental change to occur and so far analysts have missed the mark with their predictions. In early December, uranium was trading around $17.75 per lb.

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.