Tuesday, January 16, 2007 8:35:26 PM
In her recently published analysis, Mohr said uranium was the third- best performing commodity this year "and will likely be the top performer in 2007." She forecast that spot uranium prices are expected to average US$80 a pound in 2008, possibly ending 2007 close to $90.
"The current upswing in uranium prices represents a `secular'
transformational change in global energy markets—related partly to a shift by utilities from high-priced fossil fuels—rather than
a `cyclical' upswing," Mohr asserted. "Nuclear energy is used
for `base load' electricity generation and will be little affected by an expected modest slowdown in global growth in 2007 (4.7% down from 5.2% in 2006), using `purchasing power parity' estimates."
Mohr noted that international utilities are currently seeking 60
million pounds of term commitments from miners, although U.S.
utilities have built up some inventory. "While exploration activity has surged for uranium—across Canada, Australia, Africa and in Kazakhstan—there has been little improvement in mine production," she said, explaining that a 10-year lag between deposit discovery and new mine development is typical. While higher prices have encouraged the reactivation of some mines and increased production at others, actual mine output probably dropped this year, Mohr suggested, noting the technical difficulties of Australia's Olympic Dam and the fact that
the McArthur River expansion in northern Saskatchewan has yet to
receive regulatory approval.
Mohr forecast that mine production gains will be limited next year.
The woes of Cigar Lake compound the supply problem because it would have been "the first big increase in global supply in many years(ramping up to 18 million pounds)."
BASE METAL SHIFTS
Within base metals, Mohr suggested that leadership has shifted from copper to zinc and nickel, and to a lesser extent, lead. "The correction in U.S. housing activity and Big Three auto assemblies is taking a toll on U.S. copper demand—with most of the recent increase in LME inventories occurring in U.S. warehouses."
Nevertheless, Mohr asserted that the U.S. corrections "had only a
limited impact on overall zinc demand. China's share of global zinc consumption is 2.6 times bigger than that of the United States, limiting the negative fallout on zinc." She also noted that strong U.S. non-residential construction is more zinc-intensive than is home-building.
With global zinc consumption surpassing supplies, Mohr claimed
that "zinc is likely to move even higher in the first half of 2007, before significant mine expansion begins to trim prices in late 2007 and 2008."
Meanwhile, Mohr's analysis revealed that as LME nickel prices surged to a record high this month, China's "enormous growth in stainless steel production is likely to continued in 2007 (up a projected 35%)." Of the 32 commodities covered in Scotiabank's commodity index, "nickel was the top performing commodity in 2006—climbing an extraordinary 159% over the past year." Mohr forecast a "supercycle is expected in nickel, with prices staying strong through 2008."
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