Uranium Top?

Resource Capital Research acknowledged that they expect uranium to hit $125 /lb this year, and $140 /lb by September 2008. They expect uranium to stay around that $140 /lb a mark until 2010.

Discussing a top in the price of uranium seems a little far fetched to me at this point. This is one of the most transparent markets out there facing a major supply shortage. The whole idea of calling a market top doesn't seem plausible. We will all know when a market top comes, and that will be when supply catches up with demand.

There are a couple items of importance that I will recall from previous posts on uranium.

Uranium minds don't just sprout out of the ground on rainbows and sunshine. It takes financing, exploration, infrastructure, and a mill. This process takes years to undergo and that's assuming the company even finds enough uranium worth mining.

Also, expect there to be unforeseen supply side disruptions such as the Ranger and Cigar Lake operations. We have had two huge mines flood within 6 months of each other. Although it's impossible to predict these things, I am including future possible incidents in my supply side outlook for the market.

The demand side is blowing up world wide. With fossil fuels at a limit and this extreme fear of green house gases and their effect on global warming, there is a huge amount of demand for new nuclear plants. Also, the amount of energy produced by a pound of U3O8 is vast compared to any other form of energy. These buyers will be more than willing to pay higher prices to secure future supplies of U3O8.

There is another aspect that is usually overlooked. Here in the U.S. nuclear power plants are required to have a 5 year supply of U3O8 on site. I'm not familiar with the rules regarding this aspect on a global level, but I assume that they are very similar.

I guess if you want to meddle and try and predict a top in the uranium market, you can go ahead. If I were to guess I would bet that it will be somewhere between $200-225 /lb of U3O8. But it seems so trivial to play this game. The market is so transparent and it will be quite obvious when the top is reached.