Supply threats linger over uranium market

By Camila Reed

NEW YORK (Reuters) - The uranium market faces long-term threats to supply as demand accelerates and question marks hang over expansion plans and the recycling of military arsenals, the CEO of the world's largest uranium producers, Cameco Corp. (CCO.TO: Quote, Profile, Research, Stock Buzz), said on Monday.

"There are big supply side uncertainties. Today's scarcity is due to the fact that there was no exploration done in a meaningful way," Cameco CEO Jerry Grandey told the Reuters Global Mining and Steel Summit in New York.

But the pivotal time for the market will come in 2013 when the nuclear renaissance that he predicts will lead to demand from new power plants in the United States, China and India.

Uranium is used to power most of the world's nuclear reactors.

Current world demand stands at 176 million pounds (79,833 tonnes) with supplies at 108 million pounds and recycling around 6 million pounds. The shortfall is met by drawing down inventories from military stockpiles in the U.S. and Russia.

Cameco produced 21.2 million pounds of uranium in 2005, around 20 percent of the metal's global production.

Global demand over the next year or two would remain static but was likely to rise by 1-2 percent a year over the next 10 years as attitudes toward nuclear power shifted among politicians and the public, Grandey said.

"If everything works as its should on the supply side then there will be adequate supplies to meet demand," he said.

But there were big ifs.

"In the immediate term you have a big risk to the conversion market over what's going to happen with the dismantling of Russian nuclear weapons ... Will they continue with the second stage of the dismantling program and at what rate?" he asked.

"There is some suggestion that some of the material available post 2013 might be unusable and contaminated."

Last week the Nuclear Energy Agency of the Organization for Economic Cooperation and Development (OECD), jointly with the United Nations' International Atomic Energy Agency (IAEA), predicted that the rising use of nuclear energy was expected to lift annual demand to between 80,000 tonnes and 100,000 tonnes by 2025.

It said secondary sources of uranium were now in decline.

Grandey said other potential threats to supply were whether major expansion plans in Australia would get the green light. He said the market was largely banking on these going ahead and already anticipating that diversified miner BHP BHP.L (BHP.AX: Quote, Profile, Research, Stock Buzz) would go ahead with tripling output at its Olympic Dam mine.

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