UBS expects the spot price for uranium will average $US43 per pound in the 2015 calendar year, and higher again to $US53 in 2016. "What would be great for the price would be if Japan came back and said we are going to ramp up the fleet.
But Paladin managing director John Borshoff believes there could be more to the story. "The small spot price increase experienced in August, moving from $28 a pound to now above $32, has been explained away by political issues and the possible strike.
There are also suspicions that a program to convert military-grade uranium in Russia into civilian power may have been interrupted by the recent conflict in Ukraine, further denting the supply picture and improving prices.
But UBS commodities analyst Daniel Morgan warned optimists that interruptions to supply should not be confused with increases in demand. "There’s been a few supply-side issues which has been enough for a very modest price rise.
Mr Borshoff believes the reduction in uranium production will hit hard if Japan decides to restart its entire nuclear fleet, and even harder if China delivers on its promise to build scores of new nuclear power plants over the next two decades.
There appears to be a collection of factors behind the recent price rise; numerous mines have been forced to close under the low prices, including the Honeymoon mine in South Australia.
He argues the curtailed uranium mines will take time to be recommissioned when demand returns, and the construction of new uranium mines will take much longer, given that the recent years of low prices have not incentivised explorers and developers to find future mine sites.
The lack of demand led to a steep fall in uranium prices, which kept dropping long after most pundits thought the bottom had been reached.
After falling below $US29 per pound in May, the spot price for uranium has since enjoyed a series of incremental rises, and reached $US33 per pound earlier this week.
Read more here: SMH