Uranium prices have surged on increased demand from major Asian economies, but current stockpiling is forecast to see the commodity facing a short-term slump before a long-term price hike. JP Morgan expects the uranium spot price to increase to US42 a pound this year and increase to US50 in 2016 before easing to US45 a pound in 2017. The long-term forecast remains at US75 a pound, but it does not expect that price to be achieved until 2020.
Prices have increased in recent months to US39 a pound, 40 per cent higher than a mid-2014 trough of US28 a pound, as Japan edges closer to restarting reactors and China increases nuclear capacity. Analyst Mark Busuttil said in a research note that a recent oversupply has led to significant stock build-up in Japan and China that could reduce future demand growth. The market is expected to tighten in the short term as Japan and China increase demand, but new mine capacity could mean a uranium oversupply persisting until at least 2020, Mr Busuttil said.
China is expected to increase its reactor numbers from 19 in 2014, to 27 in 2015 and 35 in 2016, before totalling more than 50 by the end of the decade. In the four years since the Fukushima accident, Japan has continued to buy uranium despite not operating reactors, and JP Morgan estimates the country to have amassed a uranium stockpile of around 45,000 tonnes, representing around 66 per cent of global annual demand for the commodity.
Additionally, China has been taking advantage of low prices and opportunistically buying substantially more material than their reactors consume, Mr. Busuttil said, estimating that China likely has a stockpile of 60,000 tonnes, enough for around 10 years worth of annual consumption. Global demand for the commodity is expected to grow between 3 and 4 per cent each year up until 2020.
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