As June gold prices hit record, uranium stayed in cellar--Scotiabank

Scotiabank economist Pat Mohr says uranium prices continue to be dampened by a variety of factors; forecasts a climb in Western Canada's hard coking coal prices.

RENO, NV - 

In the Scotiabank Commodity Price Index report released Wednesday, Scotiabank economist Pat Mohr noted that while spot gold prices touched an all-time record high in June, uranium prices continue to struggle.

In her analysis, Mohr observed that gold prices hit an all-time high of US$1,265.30 per ounce on June 25th as investors worried over the integrity of paper currencies, due to high government debt in the Eurozone, the United States and Japan.

However, spot uranium prices continue to trade at low ebb, inching up again to US$41.75 per pound in late June.

"Prices continue to be dampened by a low level of ‘uncovered utility requirements in the West, concern over further production gains in Kazakhstan and the barter of U.S. Department of Energy UF6 inventory to pay for an environmental cleanup at a closed Ohio uranium enrichment plant," Mohr advised.

The announcement of a DOE barter sale to USEC Inc., a leading supplier of enriched uranium fuel for commercial nuclear power plants, was blamed for the beginning of a uranium price decline a year ago. The sale will end in the third quarter of this year. However, Mohr said U.S. Energy Secretary Chu intends to sell additional federal uranium inventory under another program.

Meanwhile, Ottawa used the recent G-20 Summit to advance Canada's uranium trade with India and China. Canada signed a bilateral cooperation agreement with India, permitting the export of uranium concentrates and nuclear equipment from Canada to India for the first time in 30 years, Mohr noted.

Cameco also announced an agreement with China Nuclear Energy Corporation to supply China with 23 million pounds of Canadian uranium concentrates through 2020, at the time of China's State visit to Canada before the Summit.

Mohr observed that, although uranium production in Kazakhstan was up 64% last year to 14,020 tonnes and is expect to rapidly rise again to 18,000 tonnes this year, state uranium company Kazatomprom has indicated that further growth will be achieved only by increasing production from its 100%-owned mines.

"Slower development in Kazakhstan within the next several years, combined with an end to the U.S.-Russia HEU agreement in 2013 should bolster prices medium-term," she predicted.

Finally, Mohr predicted that the price of premium-grade hard coking coal from Western Canada to Asia is likely to rise from US$200 per tonne in JFY2010:Q1(April to June) to UD$225 in Q2.

"Major Japanese steelmakers have already agreed to this price increase with BHP Billiton for Australian coal," she said. "Cyclone damage at ports and rail constraints in Northeast Australia has contributed to tight world supply/demand conditions."

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