* Uranium spot price hits new 2-year low, miners' shares sag
* Idled Japan reactors weigh as politics unclear
* Uranium price seen stagnant to lower over next months
* Analysts expect recovery starting around Q2 2013
By Julie Gordon
TORONTO, Oct 5 Eighteen months after the
Fukushima nuclear meltdown, the spot price for uranium hit a
two-year low this week, putting the squeeze on the already
depressed shares of uranium miners.
With a looming election keeping Japan from making a decision
on how much, if any, of its nuclear reactor fleet it will keep,
and slowing growth in China weighing on the broader resource
sector, it will likely be months before uranium prices start
moving back toward pre-Fukushima levels.
"In the near term, the price of uranium is going to go
sideways to down," said Raymond Goldie, a senior mining analyst
at Salman Partners in Toronto, adding that the spot price is not
likely to start recovering until March or April 2013.
That is bad news for producers Cameco Corp, Uranium
One Inc and Paladin Energy Inc, which have
watched their shares plummet since a massive earthquake and
tsunami struck Japan in March 2011, crippling the
Fukushima-Daiichi atomic power plant.
Cameco, the world's largest publicly listed uranium
producer, has lost more than 48 percent of its market value in
the aftermath of the worst nuclear disaster since Chernobyl.
Uranium One is down 62 percent, while Paladin has fallen 72
The uranium spot price hit a new two-year low this week at
$45.75. That compares with the February 2011 average spot price
Weighing on the commodity are the dozens of Japanese
reactors idled since the Fukushima disaster. Just two of the
nation's 50 working units are currently up and running.
While Japan's economics minister said Friday that reactors
can be restarted if the new nuclear watchdog deems them safe,
the procedure for doing so is unclear, especially as the new
regulator says its responsibility is safety, not restarts.
Adding to the uncertainty, Japan's cabinet announced a new
energy policy last month that aimed to end reliance on nuclear
power by the 2030s, but industry lobbies called for a rethink
and within days lawmakers appeared to waiver on the commitment.
With a general election due within months, a major decision
on the nation's nuclear future appears unlikely in the near
term, and worries are mounting over how utilities will deal with
excess uranium inventories.
Still, there is a glimmer of hope on the horizon for
embattled uranium equities. There are currently more than 60
reactors under construction around the world, 26 of which are in
China, according to the World Nuclear Association.
Before Fukushima, Beijing was working on plans to boost its
nuclear capacity to more than 80 gigawatts by 2020. Those
targets are expected to be lower now, but still substantial.
The atomic expansion in China, and new builds in South
Korea, India and Russia, come as the supply side of the equation
faces a serious crunch.
With costs soaring across the mining industry, new uranium
projects, which analysts believe are needed to meet future
demand, are being stalled or shelved indefinitely as the sagging
commodity price makes building mines uneconomic.
BHP Billiton has delayed an expansion at its
Olympic Dam mine in Australia, while Cameco recently shelved its
Kintyre project, also in Australia, noting that development
would require a uranium price of $67 to break even.
Cameco has also taken a more cautious tone on its plans to
double uranium production to 40 million pounds a year by 2018,
noting that growth will not come regardless of cost.
"Lower commodity prices have led producers to increasingly
shelve projects until higher prices rationalize increased
supply," Daniel W. Scott, a New York-based analyst at Dahlman
Rose, said in a note to clients.
Scott added that over the medium term the delays will likely
have the desired effect of boosting uranium pricing.
Also, Russia's so-called "Megatons to Megawatts" program, in
which weapons-grade uranium is converted into nuclear fuel, will
end in 2013, and that could help tighten the market.
"I'm not expecting a super-squeeze, but I am expecting a
squeeze," Goldie said. "And there is a delayed reaction to that,
because there seems to be enough material on the market right
now thanks to the Japanese utilities."