Uranium Update

As the only current fossil-fuel alternative capable of providing energy on a large scale and at a low cost, uranium appears to have a bright future. Furthermore, China and India, two of the world's most voracious consumers of energy, are making concerted efforts to increase their respective abilities to generate nuclear energy. And yet, uranium is one of the few commodities that has not rebounded over the past 12 months. As evidenced by the following weekly U308 chart, the uranium price has done very little since bottoming in early 2009.

Why hasn't the price rebounded? Apart the obvious reason -- that with the price in the US$40s there has been sufficient supply to meet demand -- we don't know. The absence of a meaningful recovery has certainly surprised most of the experts on uranium supply/demand fundamentals.

It is clear that uranium is 'marching to the beat of its own drummer' rather than trading up and down with most other industrial commodities in response to changes in the US$. This could insulate uranium from the next intermediate-term commodity decline -- a decline that will very likely be underway by mid-year.

The lack of a sustained advance in the uranium price has naturally affected the shares of uranium miners, most of which have been drifting sideways or lower since May of last year.