Brussels (Platts)--21Jun2007

Hedge funds buying uranium holdings in 2006 contributed to substantial
increase in spot prices for uranium, the raw material for nuclear power plant
fuel, the Euratom Supply Agency said Thursday.
     ESA, the EU's nuclear fuel supply agency, said in its 2006 annual report 
that hedge fund buying had helped to double published spot price indicators 
from $36/lb U308 at the start of 2006 to $72/lb U308 at the end. These 
indicators exceeded $100/lb U308 in April 2007, said ESA. 
     Platts' U308 spot price indicator June 18 was $135 to $145/lb U308. 
     ESA's spot price definition--delivery within 12 months--does not include 
a time limit between contract signing and delivery of the material, hence some
spot deliveries which occurred in 2006 may have been agreed by the contracting
parties in the previous year, when the prices were lower. This would lower the
ESA 2006 average price even more compared with published spot prices. 
     Excluding Bulgaria and Romania, the average delivered spot price for 
uranium in 2006 to the EU-25 countries was Eur53.73/kgU ($25.95/lb U308), 
compared with Eur44.27 kgU ($21.19 lb/ U308) in 2005. 
     For multi-annual contracts, the average delivered price in the EU-25 in 
2006 was Eur38.41/kgU ($18.55/lb U308) versus Eur33.56/kgU ($16.06/lb U308) in
2005. 
     Since fixed price contracts are rare, spot price indicators are highly 
dependent on occasional uranium auctions, said ESA. The New York exchange 
NYMEX introduced financial futures contracts for uranium in early 2007, 
bringing uranium closer to other energy commodities and metals in that 
respect. 
     Global demand is putting pressure on supplies and prices, ESA said, with 
securing energy supplies a hot political issue in many countries, including 
China and India.
     Nuclear energy has the advantage that uranium resources are relatively 
well dispersed around the globe, and despite uranium price increases, fuel 
costs are still relatively low compared with power generation from fossil 
fuels, ESA said. Nuclear energy produces about 32% of Europe's power, making 
it the EU's largest source of low carbon power. Reducing carbon emissions is a
key aim of European energy policy. 
     For the EU-25, average reactor needs for natural uranium over the next 
ten years are forecast to be 19,840 mt U/year, while average net requirements 
are about 17,840 mt U/year, ESA said. 
     ESA recommended that EU utilities maintain an adequate level of strategic
inventories. use market opportunities to increase their inventories. and
cover most of their needs under long-term contracts with diversified supply 
sources. 
     And it was "pleased to note that for the first time in many years, 
uranium deliveries to EU utilities were slightly higher than the amount of 
uranium loaded into reactors. Thus inventories are being rebuilt in response 
to security of supply concerns and rising prices." The full report can be 
obtained at: http://ec.europa.eu/euratom/index_en.html.
---David Stellfox, david_stellfox@platts.com