Uranium Rises to Highest Level in More Than Two Years on China Contracts

Uranium rose to the highest in more than two years after China Guangdong Nuclear Power Co. agreed on long-term supply with the two largest producers and expectations Asia’s biggest economy will boost its reactor-building targets.

Uranium-oxide concentrate rose 10 cents to $60 a pound on the market for immediate delivery, Denver-based pricing service TradeTech LLC said in a report dated Nov. 26. Two sales totaling less than 500,000 pounds took place last week as volumes slid due to the U.S. Thanksgiving holiday, TradeTech said.

“China’s imports this year equal about 20 to 25 percent of global consumption,” Max Layton, a metals analyst with Macquarie Bank Ltd. in London, said by phone. “That’s four times what I estimate China to consume, which tells us they are building up stockpiles.”

China’s uranium demand may rise to 20,000 tons annually by 2020, more than a third of the 50,572 tons mined globally last year, according to the World Nuclear Association. China Guangdong agreed to buy 29 million pounds of uranium through 2025 from Cameco Corp. last week after striking a deal with the miner’s larger rival Kazatomprom earlier this month.

One million pounds of uranium translate into about 385 tons of the radioactive material, according to Macquarie’s Layton. The metal is processed into fuel for atomic power plants.

Nuclear Target

China hosted its first International Nuclear Symposium last week at which the country’s nuclear agency’s vice chairman, Zhao Chenkun, said the target to install 40,000 megawatts of nuclear capacity by 2020 will be increased, TradeTech reported. China may double its current 2020 target, TradeTech and Cameco said.

“Sellers were encouraged by the announcement this week that China made further long-term commitments,” TradeTech said in the report.

China Guangdong, one of the nation’s two main nuclear utilities, plans to triple its 17,000 megawatts of capacity by the end of this decade, Saskatoon, Saskatchewan-based Cameco said Nov. 24.

China has stockpiled 17,000 tons of uranium over the last five years and may buy at least 35,000 tons more over the next decade to maintain stock that is a multiple of the country’s annual need, Macquarie’s Layton said. About 40,000 tons of uranium would fuel 100,000 megawatts of capacity over two years, he said.

“China’s gone aggressively and secured all of the Uzbek, roughly half of the Kazakh and some Namibia material just for this year,” Layton said. Although China does not buy uranium in the spot market, its purchases have drained the material available in that market, he said.

Deals with Kazakhstan, the world’s biggest supplier of the material, Uzbekistan, and Namibia has taken more than 6 million pounds out of the spot market, according to Layton’s estimates. “I see uranium’s new floor at $55 now,” he said.

Uranium hit a peak of $138 a pound in June 2007, according to TradeTech, while rival pricing service UxC, based in Roswell, Georgia, measured the top at $136 a pound. The price tumbled 69 percent as companies increased output and the U.S. sold off some material from stocks.

The radioactive metal traded at less than $7 a pound at the start of 2001.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net

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