Strong demand to boost spot uranium price in 2008

By Anna Stablum

LONDON, Jan 22 (Reuters) - Uranium spot prices are forecast to climb this year on stronger demand, but rising supplies are expected to cap the market in 2009, a Reuters survey showed.

A survey of 16 analysts conducted over the last month produced an average mid-range price for spot uranium UX-U3O8-SPT of $106.90 per pound in 2008 and $91.90 in 2009.

The average weekly price in 2007 was $98.55 a pound, according to leading price publisher Ux Consulting.

Analysts say prices will ease next year on rising supplies, mainly from Kazakhstan, but also from Canada and southern Africa.

"Uranium is likely to stay relatively strong until new production comes on stream later in the year," analyst Charles Kernot at Seymour Pierce told Reuters.

Uranium, a silvery white metallic element, was last week trading at $89.5 on the spot market, compared with $7 in 2000. "In the short term, we think that the downside for uranium spot prices from current levels is very limited," said analyst Max Layton at Macquarie Bank.

A recent surge in prices was fuelled by global concerns about energy security and a worldwide hunt for alternatives to high carbon-emitting fossil fuels.

Prices jumped to a record high of $136 in June, bolstered by tight market conditions and speculative buying.

Increased activity by funds and speculative buying was seen helping drive prices to around $125 per pound by mid-year, said Gene Clark, executive officer at uranium consultancy TradeTech.

"But waning interest in late 2008 and through 2009 is expected," he added.

"SUPPLY-SIDE CONSTRAINTS"

Financial players together with utilities would be the main price drivers in 2008, analysts said.

Data in October from the World Nuclear Organisation showed 33 reactors under construction and 94 ordered.

Producers are expected to continue to meet long-term contract commitments by purchasing spot metal due to supply disruptions.