Uranium Recovery Postponed as Price Drops to 2-Year Low

Uranium’s recovery from the Fukushima nuclear accident may take one or two years longer than analysts estimated as stockpiles in Japan and Germany keep prices low and cause mining companies to defer new development.

The price of uranium for immediate delivery declined to $47 a pound as of Sept. 17, its lowest in two years, according to Ux Consulting, a Roswell, Georgia-based uranium information provider. BHP Billiton Ltd. (BHP) and Paladin Energy Ltd. (PDN) have slowed or deferred development this year of some projects to produce the raw material in nuclear reactor fuel.

Japan temporarily shut all of its nuclear reactors after the disaster at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. That nation’s return to nuclear power and demand for electricity in China, which is building 25 reactors, was supposed to help drive prices for the fuel back up in 2015, said Thomas Neff, a retired physicist at the Massachusetts Institute of Technology. That date that may be pushed back a year or two.

“There was a wave of optimism the Japanese would come back on fast and that China would resume rapid development,” Neff, who now works as an energy industry researcher for the university’s Center for International Studies, said yesterday by phone from Jackson, Wyoming. “Day-to-day spot prices are reflecting the belief that the short-term outlook -- at least two to three years out -- is less certain than it was.”

Japan will end the use of atomic power by the 2030s, the government said Sept. 14, and Germany’s government has also decided to phase out nuclear energy. China continues to review approvals for new reactors amid concerns about safety, Heenal Patel, a London-based energy analyst with Bloomberg Industries, said yesterday.

Net Demand

“Japanese and German inventories and displaced supply would result in no net new demand until after 2015,” Neff said, citing a January study his group did. The new target for a return to uranium demand is 2016 or 2017, he said.

Not everyone expects the uranium price to languish.

“We retain strong conviction in starkly higher prices on compelling supply-demand fundamentals and the prices required to incentivize new supply,” David Sadowski, a Vancouver-based analyst at Raymond James Ltd., said in a Sept. 8 note to clients.

Sadowski expects prices to average $60 a pound next year, $72 in 2014 and $75 in 2015, according to the note.

Prices this year have averaged $50.84 a pound. Uranium next year may average $64 a pound, the median estimate of four economists and analysts. Three analysts expect $70 in 2014, according to data compiled by Bloomberg.

‘Economic Challenges’

BHP, the world’s largest mining company, last month put on hold an expansion that would make its Olympic Dam project in Australia the biggest uranium mine.

Cameco Corp. (CCO), the world’s third-largest producer, said in July that its Kintyre uranium project in Australia would need a $67 uranium price to be economical. The company sold uranium for $42 a pound during the second quarter.

“To fuel the more than 60 reactors currently under construction and the further growth we expect by 2021, production will have to come from new primary sources,” Saskatoon, Saskatchewan-based Cameco said in a July 27 statement. “In today’s environment, those sources of production pose economic challenges, for us and other producers, similar to those we have identified at Kintyre.”

Paladin, an Australian company that mines uranium in Africa, is delaying a feasibility study on phase four of its Langer Heinrich mine in Namibia, the company said on a conference call in May.

New Mines

Cameco dropped 1 percent to C$21.04 in Toronto today. It has risen 14 percent this year. Paladin climbed 1.8 percent to A$1.44 yesterday in Sydney and has gained 5.1 percent in 2012.

A lack of investment in new mines may lead to a substantial increase in prices toward the end of the decade, said Dustin Garrow, Paladin’s executive general manager of marketing.

“You’d have to see $85 uranium on a sustained basis to justify construction of new mines to meet supply requirements through 2020,” Garrow said yesterday by phone from Littleton, Colorado.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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