Uranium Will Rise 19% as Demand Outstrips New Supply, Morgan Stanley Says

Uranium prices will average $52.25 a pound next year, 19 percent higher than this year, as new supplies are expected to lag behind an increase in demand for the nuclear fuel, Morgan Stanley said in a report.

This year through mid-October, uranium oxide concentrate for immediate delivery averaged $43.78 a pound (0.45 kilogram), and in 2012 prices are forecast to rise to $60, Morgan Stanley analysts Peter Richardson and Joel Crane said in a report today.

Spot uranium was at $49.25 a pound in the week through Oct. 18, according to Roswell, Georgia-based Ux Consulting Co. A nearly balanced uranium market make prices “vulnerable to supply shocks and/or new build announcements,” Richardson and Crane wrote.

This year’s average is 6 percent below last year’s level and almost 30 percent lower than the average in 2008, according to the report. “The steady, two-year erosion in uranium prices has translated into difficult mining breakeven points, particularly for new uranium projects,” the analysts said.

Lower uranium prices made supply growth “increasingly dependent” on production from Kazakhstan, the analysts wrote. Kazakhstan produced 14,020 metric tons of uranium last year, surpassing Canada as the world’s largest producer, according to data from the World Nuclear Association.

Demand for fuel was expected to rise by 24 percent through 2015 as new nuclear plant capacity “is rapidly coming online and the planned project pipeline is briskly increasing,” according to the report.

More Nuclear Plants

China is planning to increase its nuclear capacity six-fold and India aims to add 20 to 30 new reactors by 2020, according to the WNA. In addition, demand from developed economies is also set to rise on “concerns over carbon-emission costs and energy-supply security,” according to the report.

Over the next decade there will be an additional 147 nuclear plants coming online, according to Morgan Stanley.

These plants will require 32,900 tons of nuclear fuel, almost half of the demand from this year’s 443 commercial reactors, according to the report. Most of the demand growth will have to be met by mines as secondary supplies from recycled Russian warheads may cease with the end of an international agreement in 2013, according to the report.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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