Newswise — According to some industry analysts, the spot price of uranium has been depressed throughout 2012 due to a variety of factors. Some point to uncertainty in Japan's long-term nuclear energy policy: Despite the restart of two nuclear reactors at Kansai Electric's Ohi plant earlier in the year, the Japanese government has not made a firm commitment on their plans for nuclear in their energy mix.
Energy policy in Japan is very important for the country to stay competitive on a global basis, with energy-intensive industries being pillars to their economy. The Japanese import roughly 84 percent of their fuel for electricity power generation; they previously turned to nuclear power to make up 30 percent of their power generation needs because of economic and environmental benefits. The restart of some of Japan's idled nuclear reactors could provide significant positive catalysts for the uranium market in the coming months.
Other analysts are even more optimistic, noting that over the past few months, multiple developments have taken place that are constructive for higher uranium prices in the medium to long-term. One major company has delayed a $30 billion expansion of a mine, and three other prominent players have all canceled or delayed development of uranium projects due to poor economics at the current spot uranium price. These four projects had been expected to add 27.1 million pounds of uranium supply to the global market by 2020 on an annual basis, according to data provided by Ux Consulting. Furthermore, JP Morgan research stated that the incentive price for the development of new conventional mining projects needed to be $83 per pound or higher.
The expiration of the Highly Enriched Uranium (HEU) agreement between the US and Russia at the end of 2013 is expected to reduce supply to the global uranium market by 24 million pounds per year, according to Amir Adnani, CEO of Uranium Energy Corp, a US-based uranium production, development and exploration company operating North America's newest emerging uranium mine. This reduction would be significant given the current worldwide supply imbalance to meet operating reactor requirements, and particularly in the US, where 104 operating reactors—producing nearly 20 percent of the country's electricity—consume 55 million pounds of uranium annually, of which 95 percent is imported. Mr. Adnani went on to remark that Uranium Energy is a low-cost producer and is currently seeing profits as a result of the use of its production method—known as in situ recovery—despite the current depressed uranium prices.
The worldwide nuclear build-out continues, with the number of reactors currently under construction totaling 64 in 13 different countries. China, India, Russia and South Korea have reaffirmed their commitment to nuclear energy and continue to lead the global nuclear build-out-a further development signaling a potential upturn in uranium demand.
For more information on Uranium Energy’s mining activities, please visit www.uraniumenergy.com.
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