Uranium Prices Rise as Inventories Decline


John Clinkard -- May 25, 2007
While oil and natural gas prices are at the centre of much of the discussion around energy prices, the fuel exhibiting the most dramatic price rise over the past four years has generally been overlooked.
Until recently, prices for uranium have been depressed, even though world uranium demand has exceeded production for several years. However, in the past four years, the price of uranium has skyrocketed from a mere $7 US per pound to its current level of $113 US per pound



Prior to 2003, ample supplies of highly enriched uranium from obsolete military warheads and the available uranium production from the new states formed following the breakup of the Soviet Union helped to satisfy demand. Because few countries had expanded their nuclear generating capacity, expansion of global uranium exploration or mine production was also limited.
However, as concern about greenhouse gas emissions has brought global attention to non-carbon-based energy sources — and uranium is the most popular of these — the picture has changed.
While total consumption of uranium has not changed significantly over the past five years or so, the inventory has steadily declined. This drop in inventories, combined with a number of disasters, natural and otherwise, has curtailed supply and triggered the recent rapid escalation in prices.
The world’s largest uranium producer, Cameco Corp. Inc., produces 28% of the world’s total output of uranium. Flooding of a mine shaft at the company’s Cigar Lake, Saskatchewan location — the world’s largest undeveloped high-grade uranium deposit — has delayed the start of production there for at least two years.
This major supply interruption was exacerbated when Australia-based Energy Resources, the world’s second-largest uranium producer at 23% of total production, announced that heavy rains at its Ranger mine, the world’s second largest, had rendered the company unable to fulfill a number of contracts. Energy Resources has now cut its 2008 production plans by up to 35%.
Although the level of uranium exploration is currently at an unprecedented high, the time lag between the discovery and the actual production of a new uranium source, against a background of steadily rising demand, suggest that uranium prices will remain high for the next 12 to 18 months at least.