LONDON - Uranium prices have fallen by 12 percent from a record high at the end of June with an earthquake in Japan dampening sentiment, but most traders and analysts believe the market is still far away from its peak.

Prices have soared from just $7 in 2000 as nuclear power has become more attractive due to high oil prices and global efforts to cut carbon dioxide emissions.

But the Japanese earthquake on July 16 forced the closure of the world's biggest nuclear plant and highlighted the energy source's dangers, just when support had been growing.

"Something like the accident, due to the earthquake in Japan, could psychologically drive the prices a bit lower," analyst Eugen Weinberg at Commerzbank in Germany said.

But action by Tokyo Electric Power Co. (TEPCO) to shut its Kashiwazaki-Kariwa plant after radiation leaks should have been presented as a success, others said.

"They had a severe earthquake and the reactor integrity was extremely good," Director of Strategy and Research Steve Kidd at the World Nuclear Association in London said.

Another incident added to safety scepticism after a fire at the end of June forced emergency closures of two German plants under the Swedish power company Vattenfall AB.

"It is bad news and bad press means the opposition against new plants amongst the population is increasing," Weinberg said.

But nuclear programmes take a long time to change.

"If you have committed to build or you are in the process of building ... it is going to be quite a severe decision to make a U-turn," a London-based uranium broker told Reuters.

There are 437 nuclear reactors operating around the world, with a further 74 reactors under construction and another 182 planned, according to the World Nuclear Association.

The broker said prices had slipped as the number of acquisitions of physical uranium had fallen due to the northern hemisphere's summer lull and overheated prices.

DECELERATION

"This is not an inflection point -- it is just a deceleration," said analyst Daniel Brebner at UBS. "We have seen the uranium price going one way for a couple of years now."

"The fact is that the market is under-supplied and I don't really see that changing until 2009-2010."

UBS forecast uranium would trade at $127 per pound in 2007, rising to $196 in 2008.

Citigroup said the correction was probably due to subdued demand from utilities, with the uranium consultancy UX reporting unsuccessful UF6 uranium auctions over the last month and US government sales.

"The US department of Energy (DOE) is selling 200 tonnes (or 0.2 percent of annual world supply) of UF6," Citigroup's report said.

Citigroup kept their outlook unchanged, looking for prices above $100/lb over the next three years in a tight market.

Uranium demand runs at roughly 80,000 tonnes per year, while mined output is about 60,000, leaving a shortfall of around 20,000. That deficit has been met by reusing highly-enriched material from decommissioned nuclear warheads, but mine output will have to rise to meet future demand.

According to the World Nuclear Association, the market could tighten further after 2015 due to dwindling supplies of secondary material, such as utility stockpiles and scrapped atomic weapons, and uncertainty over primary output.

"Fundamentally the market is still very strong," said uranium fund manager Andrew Ferguson at New City Investment Managers Ltd in London. "The new companies that are bringing production online are still struggling."