Anthony Milewski reports that of all the metals, uranium probably is the best example of sentiment outweighing fundamentals in the resource sector. While spot price is nearly 30 per cent higher than its eight-year low of approximately US28 dollars per lb. in May last year, it remains far below the estimated US65 dollars a lb. to US70 dollars per lb. required for many uranium producers to make money. That fact alone is one of the biggest reasons that primary production is falling and very few new exploration projects are getting financed.
At time of this article, 65 new reactors are under construction around the world, 165 more have been ordered or are planned and an additional 331 have been proposed. Those numbers mean that the nuclear energy sector is growing at a substantially higher rate than prior to Fukushima in 2011. These are strong fundamentals. On top of this, the nuclear industry continues to put out very strong news, such as Bloomberg article this month about nearly 800 billion dollars of new reactors under development in Asia alone and a recent announcement that CNNC, China second largest nuclear power operator, is undertaking a 2.6 billion dollar rise to further nuclear development.
In a bull market or even in a market with neutral sentiment that sort of news would push up spot prices and company stock prices. Yet for the uranium sector, there is barely a market recognition. Such is the power of sentiment over fundamentals. In the short term (aka this year), Milewski concludes that it is likely that uranium prices will rise but not higher than US45 dollars per lb. at the spot level. Looking a little longer term, it is worth noting that, according to uranium market analyst, David Talbot, around 15-20 per cent of the uranium required to operate the 437 reactors around the world is still uncovered for 2016-2017. In other words, there will be seeing more buying and much stronger upwards price pressure.
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