This past year may have been a sour one for uranium spot prices, but 2012 brought many positive developments for market fundamentals — especially in the second half of the year. Industry analysts see these developments as early signs of a crucial turnaround for uranium spot prices and uranium mining shares.
The uranium market has been on a long and bumpy ride to recovery since the 2008 financial crash crippled the commodities sector. Throughout the second half of 2010, investors cheered as the U3O8 spot price surged more than $30/lb, eventually hitting a pre-crash high of $72/lb in January 2011. However, the industry fallout following the Fukushima Daiichi nuclear disaster in March of that year wiped out most of the rally's gains and spot prices remained range-bound, between $49/lb and $52/lb, for nearly a year. In 2012, uncertainty was the dominant factor affecting spot prices. Previously nuclear-reliant nations like Japan and Germany signaled that they might be winding down their nuclear programs, while the potential that offloaded supply could flood the market made many buyers hesitant to buy at $50/lb, driving short-term spot prices down to $40/lb early in the last quarter. The most significant development in 2012 came last month, with the pro-nuclear Liberal Democratic Party's landslide victory in Japan's federal election. That indicates that there will likely be a faster-paced restart program for the nation's 48 inactive reactors. Uranium gurus like David Talbot, senior mining analyst at Dundee Securities, believe 2013 will herald a return to the global nuclear renaissance. However, the supply/demand fundamentals leading the recovery won't begin to have any realized impact on the spot market until the second half of the year, when Japan's idled nuclear reactors begin to come back online.