More pain for uranium sector as price dips
Already battered by headwinds, including strong opposition from environmentalists, WA's fledgling uranium sector is set for more grief amid expectation the nuclear fuel's low price will fall another 6 per cent within the next few months.
Analysts at consultancy Resource Capital Research say the forecast drop in uranium oxide spot price over the coming three to six months is despite what appear to be sound long-term fundamentals for the industry.
However, the continued fallout from Japan's nuclear crisis and Germany's subsequent decision to close its 17 reactors by 2022 is expected to add downward pressure on the U{-3}O{-8} spot price, which, at $US48.85 ($46.16) per pound, is back at levels seen immediately after the March tsunami triggered the Fukushima plant explosion.
The spot price was $US67.75/lb before the Fukushima crisis.
"The fund-implied price, an indicator of market price expectations looking out three to six months, points to a spot price of $US45.95/lb, reflecting expectations of potential new supply to enter the market . . . and uncertainty over the extent of potential Japanese and German utility surplus dispositions," RCR said in its uranium sector review.
The uranium sector had also been weighed down by broader macro-economic factors, such as concerns about the state of the US and European economies.
RCR said it would not be until late this year, at the earliest, that the sector's outlook was likely to improve and buying opportunities for investors would emerge.
Although the long-term U{-3}O{-8} contract price has remained relatively stable at $US60/lb to $US75/lb, investor support has evaporated and the share prices of most ASX-listed uranium plays have fallen more heavily than the wider market. The share price falls have eroded any chance of capital raisings to fund drilling programs or project development while continued production problems experienced by market leader Paladin Energy have added to the negative sentiment hanging over the sector.
The Merrill Lynch uranium equity index, which tracks global listed stocks, is down 19 per cent over the past month and 23 per cent in the past year. The underperformance masks what are generally regarded as positive longer-term fundamentals, given an expected increase in U{-3}O{-8} demand as 84 new nuclear reactors worldwide are commissioned by 2017.
