Like so many commodities, uranium got a lot of hype before financial markets collapsed. Yet, in the aftermath of the recession its price hasn’t recovered nearly as quickly as oil. In fact, until midway through 2010, it had barely rebounded at all.
But there is hope on the horizon. As TD Securities noted in a special report on uranium, China’s “massive entry” into the market is welcome news for producers. Last week Areva announced a 10-year supply agreement with China Guangdong Nuclear Power Co., the country’s largest nuclear utility, worth $3.5-billion (U.S.) And this summer Cameco Corp. CCO-T announced a separate long-term supply contract with another Chinese utility (terms weren’t disclosed).
China’s uranium imports are skyrocketing. At the end of August, 2010, import levels were up three times over the same period in 2009. And as demand increases, TD noted that hedge funds are coming back to the market.
To account for this interest in uranium, TD increased its 2011 forecast price by 25 per cent to $62.5 a pound, and moved its 2012 and 2012 projections to $75 a pound.
That translates into good news for producers like Cameco, who released third quarter earnings yesterday. Although the quarter wasn’t particularly strong, the company said it expects one third of its sales to be delivered in the fourth quarter. Investors have taken notice. The company’s shares are up about 14 per cent since Monday morning.
