URANIUM prices rocketed to their highest-ever levels last week as hedge funds plunged into the market and took big bets on prices rising even further.
The spot price for uranium oxide shot up $10 a pound over the week to $85 as buyers fought for the limited amount of the metal up for auction.
Analysts at RBC Dominion Securities, the Canadian bank that tracks the uranium market, said they forecast the average price for 2007 to reach $100 a pound.
Uranium prices have increased eightfold over the past three years, and by $13 a pound since the beginning of the year. It has become the latest commodity to enjoy a boom, following similar runs in the price of gold, copper and iron ore.
Market watchers say prices have been driven by three factors — an imbalance between supply and demand, an expected renaissance in the nuclear power generation industry, and now the entry of speculative buyers into the market.
Andrew Ferguson, manager of a quoted uranium investment fund, Geiger Counter, said: “We have hedge funds competing in the market for the very first time against the utility companies who are the normal buyers.”
The world’s 442 operating nuclear plants require 180m pounds of uranium a year, but mines supply only 100m.
The remainder has to date been supplied by releases from strategic national stockpiles and from the decommissioning of nuclear weapons.
The latter two sources are expected to tail off as countries hold on to their stockpiles, and as existing weapons-decommissioning agreements expire.
Production from existing mines is also gradually declining, with the opening of mines in Australia, one of the world’s biggest sources of the metal, a subject of considerable political controversy.
Climate-change worries have triggered a renewed interest in building nuclear power plants. China has plans to build 60, while America has given outline permission for the construction of a new generation of nuclear reactors.
The UK’s plans to resume building nuclear power stations stumbled last week with the success of a judicial review brought by the environmental group Greenpeace. Despite the delay, Whitehall sources still expect a parliamentary vote on the issue in the autumn.
British Energy, the operator of most of Britain’s nuclear power plants, recently signalled an interest in joining a consor-tium to build more stations, and that it would contribute land at its sites.
This week’s sharp jump in prices was thought to be caused by hedge funds scrambling to gain access to an auction on Tuesday by a US provider of a source of fixed-price uranium.
“Hedge funds, in particular, are interested in securing material on a fixed-price basis,” said UX Weekly, an industry newsletter. “They are willing to bet on the future movement of price, but in order to do this they need to first tie down price.”
Some analysts believe hedge funds and other nongovernmental or utility companies now hold about 15m pounds of uranium in storage.
Geiger said: “We are really into a perfect storm in this market. Prices have been high, but if you look at the fundamentals, I think they still have a long way to go.”
Shares in uranium mining companies have also jumped this year, pushed up by rising metal prices and by the expectation of consolidation in the industry.
Two Canadian companies combined this month to create the world’s largest uranium miner when UrAsia Energy agreed to a $2.9 billion (£1.47 billion) reverse takeover by SXR Uranium One.
The spot price for uranium oxide shot up $10 a pound over the week to $85 as buyers fought for the limited amount of the metal up for auction.
Analysts at RBC Dominion Securities, the Canadian bank that tracks the uranium market, said they forecast the average price for 2007 to reach $100 a pound.
Uranium prices have increased eightfold over the past three years, and by $13 a pound since the beginning of the year. It has become the latest commodity to enjoy a boom, following similar runs in the price of gold, copper and iron ore.
Market watchers say prices have been driven by three factors — an imbalance between supply and demand, an expected renaissance in the nuclear power generation industry, and now the entry of speculative buyers into the market.
Andrew Ferguson, manager of a quoted uranium investment fund, Geiger Counter, said: “We have hedge funds competing in the market for the very first time against the utility companies who are the normal buyers.”
The world’s 442 operating nuclear plants require 180m pounds of uranium a year, but mines supply only 100m.
The remainder has to date been supplied by releases from strategic national stockpiles and from the decommissioning of nuclear weapons.
The latter two sources are expected to tail off as countries hold on to their stockpiles, and as existing weapons-decommissioning agreements expire.
Production from existing mines is also gradually declining, with the opening of mines in Australia, one of the world’s biggest sources of the metal, a subject of considerable political controversy.
Climate-change worries have triggered a renewed interest in building nuclear power plants. China has plans to build 60, while America has given outline permission for the construction of a new generation of nuclear reactors.
The UK’s plans to resume building nuclear power stations stumbled last week with the success of a judicial review brought by the environmental group Greenpeace. Despite the delay, Whitehall sources still expect a parliamentary vote on the issue in the autumn.
British Energy, the operator of most of Britain’s nuclear power plants, recently signalled an interest in joining a consor-tium to build more stations, and that it would contribute land at its sites.
This week’s sharp jump in prices was thought to be caused by hedge funds scrambling to gain access to an auction on Tuesday by a US provider of a source of fixed-price uranium.
“Hedge funds, in particular, are interested in securing material on a fixed-price basis,” said UX Weekly, an industry newsletter. “They are willing to bet on the future movement of price, but in order to do this they need to first tie down price.”
Some analysts believe hedge funds and other nongovernmental or utility companies now hold about 15m pounds of uranium in storage.
Geiger said: “We are really into a perfect storm in this market. Prices have been high, but if you look at the fundamentals, I think they still have a long way to go.”
Shares in uranium mining companies have also jumped this year, pushed up by rising metal prices and by the expectation of consolidation in the industry.
Two Canadian companies combined this month to create the world’s largest uranium miner when UrAsia Energy agreed to a $2.9 billion (£1.47 billion) reverse takeover by SXR Uranium One.
Source: The Sunday Times
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