Friday, November 11, 2005

Uranium prices to soar on nuclear boom

Business Day - News Worth Knowing

URANIUM contract prices may more than double over the next five years as demand from nuclear power plants outstrips supply, Merrill Lynch said in a report.

The gains would reflect higher prices for immediate delivery, which had more than tripled in two years to $33/lb and ?are not scaring any customers off?, Merrill analysts said in the November 1 report, citing a briefing from Rio Tinto.

Merrill and Rio declined to comment. Global demand may rise as much as 3% a year, underpinned by a revival in nuclear power plant construction, Rio told Merrill, according to the report.

Sixty new reactors may be built in the next two decades, according to Rio, which controlled the world?s second and fourth-largest uranium mines. ?Rio do believe there has been a structural change in the uranium business,? the report said.

?It takes two-and-a-half years for any increase in spot prices to start to flow through to higher realised contract prices,? the report said.

Contract prices may more than double to $31/lb in 2010, from an estimated $15 next year, Merrill said in a separate October 31 report.

Demand was rising as Russia boosted consumption of uranium in power plants and cut back on sales from its stockpiles at a time when the fuel was becoming more popular in India and China.

China?s $1,65-trillion economy, which expanded 9,4% in the third quarter, was already the world?s biggest consumer of commodities.

Demand for uranium would outpace supply by about 20m/lb in 10 years? time, from 13,6m/lb this year, the October 31 report said.


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