ANALYSIS-Uranium Bearish as Tight Credit Cools Investors

By Anna Stablum

LONDON, May 1 (Reuters) - Uranium prices could fall further as investor buying interest fades because of tighter money and nuclear reactor demand staying sidelined, investment managers say.

Uranium, used to fuel the world's nuclear plants, hit a record high of $136 per pound in June last year on expectations of a massive build-up of power plants, but since then the spot price UX-U3O8-SPT has more than halved to $65.

"Compared to last year's sunny prospects for uranium investment, the sky is now somewhat cloudier," said Robert Wallace, CEO of London-based uranium investment manager Yellowcake.

Bearish sentiment has spread to the long-term contract price, which fell $5 for the first time in 11 months to $90 this week, as many reactors now have sufficient supplies.

A long-term price is settled between producers and consumers, mainly nuclear reactors, in contracts for at least three years, according to UxConsulting.

The main driver behind the spot price, which accounts for nearly 10 percent of total annual turnover, has been the speculative community believing in a "nuclear renaissance."

The spot price sets the tone for overall market sentiment.

"This turnaround in uranium being the trendy thing and people not being interested in it has been driven by external factors like...the credit crisis particularly in the U.S.," said President Treva Klingbiel of TradeTech, a leading uranium consultancy.


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