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RPT-Uranium prices set to march higher as climate deal boosts nuclear

Published 29/12/2015, 07:50 pm
RPT-Uranium prices set to march higher as climate deal boosts nuclear
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(Repeats Monday story without change)

* China to build 6 to 8 nuclear plants annually up to 2020

* Uranium prices to rise by more than half by 2018 - analysts

* Global surplus of the metal to halve by 2020 - estimates

By Clara Denina

LONDON, Dec 28 (Reuters) - Uranium prices are expected to outperform other commodities in 2016 and beyond as a global climate change deal and growing demand from Asia bolster the prospects of the nuclear industry.

The metal that powers nuclear reactors has been gradually recovering from a sharp decline in the wake of Japan's Fukushima disaster in 2011, and has gained this year as several other commodities slumped due to oversupply and concerns about Chinese economic growth and U.S. monetary tightening.

It is expected to climb further, according to analysts, after governments forged a landmark agreement to reduce green gas emissions at a global climate summit in Paris last month - a move that supports nuclear power generation and in turn uranium. urn:newsml:reuters.com:*:nL8N1410F

Nuclear power stations currently provide around 11 percent of the world's electricity but the share is likely to increase as China and India expand their capabilities.

China - seeking to reduce its dependence on polluting coal - plans to build six to eight nuclear power plants a year for the next five years, and India aims to generate 25 percent of its electricity from nuclear by 2050, up from 4 percent in 2013. urn:newsml:reuters.com:*:nL4N0XJ1U2

Meanwhile Japan is restarting four reactors, which may accelerate the country's return to atomic energy. urn:newsml:reuters.com:*:nL3N14D1Z5

"The China boom is only now happening and while 'nuclear' might still be a toxic word, nuclear power generation is recovering towards pre-Fukushima levels," said Macquarie analyst Stefan Ljubisavljevic.

"It might not be popular, but it does provide the clean and consistent base-load power generation that many nations are seeking."

Prospects of higher demand and strategic stockpiling from U.S. utilities sent spot prices UX-U3O8-SPT to an average of $39 a pound in 2015, up 18 percent from $33 last year, making it the best-performing metal of the year and one of the few commodities to post a yearly increase.

Crude oil LCOc1 , the most traded commodity by far, lost 35 percent of its value this year, while benchmark base metal copper CMCU3 fell 26 percent and gold XAU= dropped 9.4 percent. Cocoa CCH6 bucked the trend, with a 12-percent rise.

Both Bank of America-Merrill Lynch (BofA-ML) and BMO Capital forecast uranium prices will rise to test $60 a pound by 2018.

URANIUM DEALS

Kazakhstan, the world's biggest uranium producer, has just signed cooperation agreements with Chinese companies to build a nuclear fuel plant in the central Asian country, while Canada's Cameco CCO.TO , the world's largest listed uranium mining company, signed a five-year deal in April to supply fuel to Indian nuclear reactors. urn:newsml:reuters.com:*:nNrm48rLG7

BofA-ML analyst Oscar Cabrera said he expected uranium prices to continue to advance after 2018, thanks to the increasing demand from emerging markets China and India.

Uranium prices plunged after a major earthquake and tsunami in Japan disabled the power supply of three Fukushima reactors, causing a meltdown and the release of radioactive material in March 2011. From around $60 before the disaster, they hit a nine-year low of $28 in 2014.

Although the steep price decline resulted in mining cuts and delays and cancellations of projects, stockpiles remain large.

Analysts' estimates of the global market surplus range from 20 million to 27 million pounds in 2015, which they say is likely to fall to between 7.5 million and 10 million by 2020.

Around 150 million pounds of uranium are estimated to have been consumed in 2015, according to data from the World Nuclear Association.

Kazakhstan is the world's biggest uranium producer, followed by Canada and Australia, while the United States is the biggest consumer, followed by France and China.

BofA-ML forecasts consumption will rise to just below 200 million pounds by 2020.

"Uranium has proven to be a pretty good place to hide for resource and energy-focused investors," said BMO Capital Markets analyst Edward Sterck, adding: "I think it will continue." (Editing by Veronica Brown and Pravin Char)

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