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Spot U3O8 Up On Increasing Demand

Commodities | Jan 18 2011

By Rudi Filapek-Vandyck

Analysts at JP Morgan used the relative quiet December-January period to repeatedly question whether spot uranium prices had any more room left to move further up north, but analysts at Macquarie had no such questions when they decided to publish a general update on commodity prices this morning. Among the cherries that can easily be picked from a super-bullish Macquarie update are the expectation that copper will reach prices of US$5/lb in both 2011 and 2012 (year averages), crude oil prices will consistently trade above US$100 per barrel in 2012 and 2013 with projected annual price averages of US$113.50 and US$119 respectively and… that spot uranium will reach a new peak of US$75/lb in the first half of calendar 2011.

Whereas analysts at JP Morgan repeatedly stated they cannot see why the global uranium market would remain in deficit, Macquarie suggests Chinese demand will keep U3O8 in deficit and thus prices on the run. Even without the Chinese, argues Macquarie, global uranium supply would still be in deficit.

Meanwhile in the real world, spot uranium prices have continued to rise and they have now, on calculations by industry consultant TradeTech added some 7% since December. TradeTech registered another increase to its weekly spot price indicator for the week ending on Friday, with spot U3O8 rising another US$1.50 to US$66.50/lb. Only months ago spot U3O8 was registered as hovering around US$40/lb. But then, it was less then four years ago that spot prices peaked at US$136-138/lb.

Spot prices at both consultancies that each publish their own price benchmarks have now fallen in line with long term price indicators. At TradeTech, for example, the new spot price of US$66.50/lb compares with a mid-term price indicator of US$64/lb and a long-term price indicator of US$67/lb.

Analysts at Deutsche Bank have equally released bullish market projections recently. Deutsche Bank is heavily involved in investments in the uranium sector, as is Goldman Sachs.

Industry watcher TradeTech reports spot uranium still sees new entrants (thus: new demand) coming into the market, having again created a gap between price expectations among buyers and sellers. Last week saw four deals being concluded, good for more than 500,000 pounds of yellow cake changing ownership. However, in the preceding week more than 1.7 million pounds were transacted according to the consultant.

Reports TradeTech: "The gap between willing buyers and willing sellers widened this week, although buying interest continues to outstrip demand with utilities, traders, producers, and financial entities all participating in the market".

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