Demand Boosts Prices For Uranium, Nickel
Fourteen-year slump for uranium is over
CANADA looks set to cash in on price rises in two base metals that it has more of than any other country: uranium and nickel. ''World demand for uranium is 150 million pounds a year, while the supply is just 70 million pounds,'' says Julian Baldry, a mining analyst at Nesbitt Burns, a Toronto investment house. ''There's a huge shortage.''
The market is now so tight that the world's largest uranium supplier decided late last week to hold uranium back from the market, waiting for prices to rise before selling again.
''We withdrew some bids so we could stop and see where the market is going,'' says Elaine Kergoat, spokeswoman for Cameco Corp. of Saskatoon, Saskatchewan.
Share prices of Canadian uranium companies have shot up on the demand. Cameco's stock is up 48 percent so far this year.
Growing demand has pushed the price of uranium to a recent high of $13.25 a pound last week, up 47 percent from a 1994 low but still far from the 1982 peak of $43 a pound.
Shift in nuclear-power industry
''Following the Three Mile Island scare , a number of planned nuclear plants were cancelled. But that left the utilities with long-term contracts for uranium they no longer needed,'' Mr. Baldry says. ''They took delivery of the uranium then sold it into the market, causing the price to fall.'' The 14-year slump in uranium prices closed many mines, and it could take two years or more for supply to catch up with demand. Some analysts foresee a shortage until 2000. ''With demand for uranium exceeding supply by 2 to 1, it's hard to know why everyone is so excited about gold,'' says Gordon Savage, a Toronto broker who has invested in uranium stocks.
The three largest uranium-producing countries are Canada, Australia, and the United States. Production of uranium was up 13 percent in free-market economies last year, according to the Uranium Exchange Company, a uranium broker in Danbury, Conn. Nuclear plants remain a large supplier of electric power. In 1995, 439 reactors generated 17 percent of the world's electricity. Another 32 reactors are under construction worldwide.
America is the largest consumer of uranium, with 110 reactors generating 22 percent of the country's electricity. The fastest-growing markets for the mineral are in Asia, where Japan, South Korea, and China plan to increase nuclear capacity.
Nickel needed for kitchen sinks, jet engines
The other metal that could rocket up in price is nickel.
Demand for kitchen sinks, and anything else made of stainless steel, is pushing the price of the metal slightly higher. But the shares of nickel-mining firms are up sharply in anticipation of further price increases. Inco, the Canadian company that supplies more than a third of the West's nickel, has seen its stock price surge 22.6 percent since Jan. 1.
About two-thirds of mined nickel is used to make stainless steel. ''A lot of that goes into sinks and other products in the food business, where stainless steel is mandatory. Nickel is a new-age kind of metal,'' says Manford Mallory, a mining analyst at Research Capital in Toronto. ''And most of the market for nickel is not price-sensitive. You don't redesign a jet turbine just because the price of nickel went up. You live with it.''
He says the metal performs well at the end of a business expansion. In the late 1980s, at the end of the last business cycle, nickel went from $1.55 a pound to $10.84. The metal now trades around $3.80 a pound, up from last year's average of $3.73.
Prices could start moving again. ''Things are getting progressively tighter for the nickel market,'' says Shelton Yip, director of Market Research at Falconbridge Ltd., Canada's second-largest nickel mine. ''Inventories could get critically low. In my opinion, we are approaching that critical level.''