Greg Peel reports that the UBS global resource analysts have undertaken a quarterly update of commodity price forecasts and as a result, revised down their average spot uranium price forecasts for the years ahead. Significant downward revisions are driven by the slow pace of Japanese reactor restarts on the demand side meeting strong production from the Cameco Mine on the supply side. The broker 2016 forecast falls to (all prices in US$ per lb U3O8) $30 from $37. For 2017, UBS has cut to $32 from $55, for 2018, to 42 from $60 and in 2019, to $55 from $60. The pace of Japanese reactor restarts has been slower than UBS, or anyone else, expected two years ago. There are 42 operable reactors in the country potentially able to restart, but so far only two have actually restarted and a third hopes to restart next month. There are 24 in the process of approval, but most remain bogged down in this process or held up by court actions and public protest.
There are 444 reactors currently operating globally, UBS notes. Of those, 33 are Chinese. There are 21 reactors currently under construction in China, 42 in the planning stage and a further 170 proposed. While the uranium market has been waiting a long time for Japanese restarts, clearly China is the key driver of increased demand. While low uranium prices have forced the shutdown of marginal production at various mines across the globe, supply growth continues in Canada and Africa. In Canada, increased production at the Cameco Cigar Lake Mine has accounted for virtually all global production growth in the year to date. UBS believes the longer term for uranium remains positive, driven by demand growth from China and eventual demand growth from Japan. However the nearer term picture is not as healthy, given the slow pace of Japanese restarts and supply growth increasing ahead of demand growth. The broker expects the spot price to languish in the low $30s over 2016-17, which represents only a marginal profit.
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