Uranium demand revival and relief for investors

Commodityonline.com reports uranium prices seem to be bottoming while China buys major supplies  the uranium giant, Cameco Corp.

Clearly, China is building up stockpiles for its long list of new reactors. According to the China Nuclear Energy Association, China plans to build at least 60 new reactors by 2020. The average 1,000- megawatt reactor costs about $3 billion. Loading a new reactor requires about 400 tonnes of uranium to start. Take 60 reactors, times 400 tonnes each. That’s 24,000 tonnes of uranium (over 52 million pounds) – about all of the world’s current output for one year.

Higher prices would be a relief for suffering uranium investors. Uranium prices have tumbled about 70% since peaking at $136 a pound in July 2007. Part of the tumble was due to increased output. According to data from Cameco, there were at least 27 new mines, in nine countries, coming on line in the past 10 years. This has added nearly 65 million pounds a year to global output.

The strong uranium market of 2006 and 2007 stimulated the development of new supply. But with current pricing in the $40 per pound range, the economics don’t support new mines. It’s certainly not enough to ensure adequate supply for future requirements.

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