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Uranium price drops 14% on excess supply

Spot price hits $90 after reaching $138 in June

Posted August  21, 2007



Tuesday, August 21, 2007 


Uranium Slumps 14% on Excess Supply, Auction, Ux Says (Update2)

By Yuriy Humber


Aug. 21 (Bloomberg) -- Uranium tumbled 14 percent last week as supply exceeded demand and the U.S. Department of Energy prepared to sell inventories of the metal used to fuel nuclear reactors, said industry pricing service Ux Consulting LLC.


The radioactive metal fell $15 to $90 a pound, Roswell, Georgia-based Ux said yesterday in its Ux Weekly report. The decline is the biggest ever recorded by Ux. The price of uranium for immediate delivery has dropped 35 percent since trading at a record $138 a pound in June.


``Maybe in the fourth quarter we'd look for uranium to move up, but it could head lower before it goes higher,'' Glyn Lawcock, head of resources research at UBS AG in Sydney, said today in a telephone interview, adding he is ``surprised'' at the extent of the drop.


Record prices have spurred increased supplies of uranium since the first half, when there was a shortfall. Current supplies of uranium oxide concentrate, or yellowcake, are five times demand, consulting company TradeTech LLC said July 27.


The Department of Energy stopped collecting bids last week for an auction of 200 tons of uranium hexafluoride, a processed form of the metal equivalent to 519,000 pounds of yellowcake.


``The activity surrounding this event has had noted impacts on analyst predictions, and in turn, on participants' perceptions of how this market could move,'' Ux said in its report.


50 Percent Drop


Uranium for delivery in December on the New York Mercantile Exchange fell $2 or 2.9 percent, to $68 a pound yesterday. The futures have dropped 50 percent in New York in the past month.


Kevin Smith, head of commodity trading at New York-based Evolution Markets Inc., said spot prices aren't likely to fall ``much'' lower. ``I have buyers in the low $90s so there is support there,'' he said by e-mail.


Canada's Cameco Corp., the largest uranium producer, fell 94 cents, or 2.4 percent, to C$38.31 in Toronto trading as of 12:32 p.m. local time, extending the stock's decline this year to 19 percent. Uranium One Inc., which is developing South Africa's largest uranium deposit, declined 15 cents, or 1.3 percent, to C$11.25.


Uranium stocks will have ``another rough week,'' UBS's Lawcock said.

The results of the Department of Energy auction at the end of this month and an update on global uranium demand from the World Nuclear Association on Sept. 5 will bring more ``clarity'' to the market, RBC Capital's analysts including Adam Schatzker said today in a research note.


TradeTech LLP, which provides a rival pricing service, had a record weekly drop of $15 a pound in the week ending Aug. 10.







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