Uranium prices have been flat for the past two years.
What does the outlook for uranium demand and supply suggest about the future?

Demand depends primarily on the nuclear-power industry.

Some people are optimistic about the future of the industry, notwithstanding the catastrophic accident at the Fukushima power plants in Japan in March 2011.

This optimism rests on two main grounds.

The first is Asia, which is replacing Europe and America as the engine of growth for the industry. The World Nuclear Association expects Asia (led by China) to account for at least 75% of the growth of nuclear-generation capacity between now and 2030.

The second concerns fears of global warming. In the view of the Intergovernmental Panel on Climate Change (IPCC), “all governments should give serious consideration to the potential for nuclear power for reducing greenhouse gas emissions”.

But there is a serious obstacle to nuclear energy: cost.

As stated by The Economist (10 March 2012), “for nuclear to play a greater role, either it must get cheaper or other ways of generating electricity must get more expensive”.

Carbon pricing is seen by the IPCC and others as a way around this dilemma. But as The Economist notes, “there is little sign, as yet, that a price high enough to matter can be set and sustained anywhere”.

And even if nuclear energy does become more competitive in coming years, the expected surge in global natural-gas production is likely to make natural gas even more competitive.

If demand for uranium is to be constrained, supply will not be. As noted by the World Nuclear Association, “uranium is a relatively common element in the crust of the earth” and there are likely to be “ample and affordable nuclear fuel supplies into the distant future”. 

Australia alone, with one-third of the world’s low-cost uranium resources, could meet much of the likely medium-term increase in demand for uranium. And Australian uranium companies will be profitable, even with low prices.

Uranium prices, like other commodity prices, will oscillate in the short-term in accordance with changes in demand and supply.

But in the medium-term (say, 10-15 years), the outlook for significant price increases is not promising.