GAVIN EVANS
Bloomberg News
WELLINGTON — Merrill Lynch & Co. Inc. raised its 2008 uranium price forecast by 78 per cent, citing delays in new mine output and increased demand for the fuel from nuclear reactors being built in China and India.
Uranium for immediate delivery may average $75 (U.S.) a pound in 2007 and $80 in 2008, Merrill said in a Dec. 8 report. Uranium has averaged $46.58 a pound this year, according to British-based industry publisher Metal Bulletin PLC, beating the $44.12 that the securities firm forecast in July.
Uranium has gained 78 per cent this year as record oil and gas prices and emission charges on fossil-fuelled generators spurred demand for alternative sources of energy. The radioactive metal, currently $64 a pound, has gained almost $8 since Cameco Corp., the world’s biggest producer, said on Oct. 23 its Cigar Lake project in Saskatchewan will be delayed after a flood.
“We don’t see a major trigger on the horizon that will force spot prices down,” Merrill analysts Vicky Binns and Daniel Hynes said in the report. “The delay of Cigar Lake and the imminent arrival of India into the commercial fuel market have created a notable increase in demand.”
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The Globe and Mail
About 440 reactors contribute 16 per cent of the world’s electricity currently, according to the World Nuclear Association. At the end of November, 28 plants were under construction with a further 62 ordered or planned. India, which runs 16 reactors, is building another seven, and targeting nuclear capacity of 40,000 megawatts by 2020.
Merrill had expected prices in 2008 to decline after averaging $53 in 2007. Uranium surged 76 per cent last year, according to Metal Bulletin. The metal was at $64 a pound on Dec. 8.
Analysts have raised uranium price forecasts and slashed production assumptions since the Cigar Lake flood.
Prices may average $100 a pound in 2007 before easing to $85 in 2008 and $75 in 2009, Toronto-based RBC Dominion Securities Inc. said on Nov. 17.
