Price forecasts red hot for uranium

CIBC World Markets Inc. has raised its price forecasts for uranium oxide by 40 per cent, citing an environmentally driven renaissance in nuclear power and a gap between demand and supply for the metal.

The firm’s chief economist Jeffrey Rubin said yesterday that he now expects the nuclear fuel, which is currently fetching $113 (U.S.) a pound, to hit $140 this year and $160 in 2008.
The move comes amid developments that could bring a new transparency to “yellowcake” prices, which have already risen 15-fold in the past six years, by allowing speculators as well as industry participants to play the market through futures contracts for the first time.

Until now, prices have been set behind the scenes, mostly in contracts between utilities and uranium suppliers. As well, it is only in the past couple of years that investors have been able to bet on these prices directly, by investing in a handful of funds that have gone out and purchased actual yellowcake.

On Monday, however, the New York Mercantile Exchange revealed plans to launch futures contracts for uranium oxide next month in collaboration with Ux Consulting Co. LLC of Roswell, Ga., the key source of what little public information there is on prices. The contracts will be settled in cash, meaning no one will have to arrange to take delivery of the stuff.

Globe and Mail