Uranium Prices Fall with Those of Other Commodities

Kennedy Maize

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Going Down

Will prices for uranium fuel remain soft this year? TradeTech’s Klingbiel thinks they will in the short run: “Buyers are expected to return to the market during the first quarter of 2009 as new budgets take effect and buying from India and China increases; however, it could take several weeks for the market to regain momentum.” Beyond that period, who knows?

The slump in uranium prices seems to have occurred as most commodities markets of interest to power plant developers slipped, Bloomberg reported last January. “Metal and coal prices are expected to average ‘considerably lower’ in 2009,” said Goldman Sachs. Goldman said that, except for gold, it expects “2009 annual average commodity prices to be considerably lower versus 2008,” with an “oversupply” of aluminum, copper, nickel, zinc, and bulk commodities such as cement. Thermal coal, which jumped from $55/ton in 2007 to $125/ton in 2008, should fall to $70/ton in 2009.

That’s good news for power plant builders and operators, which are subject to commodities price swings for basic materials from iron and steel to aluminum to concrete. According to Bloomberg, commodity prices fell 36% in 2008 as the global recession bit into manufacturing and building plans worldwide. In 2009, said Goldman Sachs, look for a commodities oversupply, and falling commodities prices. Goldman Sachs said metals and metallurgical coal prices are likely to be “considerably lower” in 2009, as a result of the worldwide recession.

Energy prices, showing among the biggest declines in commodity prices in recent months, are likely to remain soft, according to the U.S. Energy Information Administration (EIA). The EIA’s latest short-term energy analysis predicts that U.S. gross domestic product (GDP) will decline by 2% in 2009, leading to decreases in domestic energy consumption for all major fuels. Economic recovery is projected to begin in 2010, with 2% year-over-year growth in GDP.

The economic projections suggest slower development of new energy projects—despite the Obama administration’s push for renewables and development of a new, and “smart” (whatever that means) electric grid—and less stress on the global supply chain. The power plant construction supply chain a year or two ago looked like a major bottleneck to new generation and transmission. That scenario has now changed somewhat, and supply chain issues look less like showstoppers.

Not So Fast

But now, finance may prove the major obstacle to new energy infrastructure construction, including nuclear units. Commodity prices are falling, but project developers still require access to credit to take advantage of those commodity prices.

—Kennedy Maize is executive editor of MANAGING POWER.

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