The head of Kazatomprom appreciates resumption of the work of specialized electronic uranium exchange in the Internet

/Interfax-Kazakhstan/BW, October 16, 03/ - the President of the National Atomic Company Kazatomprom Mukhtar Djakishev appreciates the resumption of work of specialized electronic uranium exchange in the Internet. "Creation of an updated version of the uranium exchange will enable to market participants to be fairly treated, which is significant advantage in comparison with the first version of the exchange", - M.Djakishev admitted on Thursday during interview to Interfax-Kazakhstan. He reminded that first attempt of organizing such an electronic exchange was undertaken in 2000 by American company called New York Nuclear Corporation (NYNCO) with the purpose of development of electronic trading in uranium. However, single sided mechanism of trades favored purchasers and did not reflect total tendency of market's development. Sales were insignificant, the system needed to be changed and improved, and as a result the exchange stopped working. In June 2003 uranium electronic exchange resumed its activity with an updated version. In connection with this, M.Djakishev noted with pleasure that the first deal concluded at an updated electronic uranium exchange Uranium On-Line was initiated by Kazatomprom on-line and as a result sold 20 tones of uranium to one of American companies. The head of the company noticed it is likely that the exchange will still not serve as a main tool for sales in the near time, but in future it may become the main factor of the transparency of the uranium market. "The more of uranium is sold at the exchange, the more predictable uranium market will be", - he stressed. Today, Mr. Djakishev said, market forces in uranium industry are not valid and it affects the formation of prices at this market. Thus, the president of Kazatomprom explained, quoted prices which orient the market are spot sales prices that in fact comprises only 10% of market sales. Spot prices, he continued, reflects the market situation only at sales moment. Only the quantity of unsold uranium, which comes from agreements' flexibility and excessive production, can be inferred from spot prices. The rest 90% of sales happen on the basis of long-term contracts, the prices of which are non-transparent and do not effect the dynamics of price indicators. Thus, the interviewed concluded, existing trading system do not allow disclosing true needs and industry's delopment dynamics. In addition, M.Djakishev reminded that he raised these issues earlier in his report at symposium of World Nuclear Association (WNA) in 2002, where he stated that "market do not respond to the industry signals, the system of prices formation does not encourage investments in uranium extraction. Small spot market rules industry. Looks like the tail fawns a dog". If one is to consider this situation in light of natural uranium production, then, as the head of Kazatomprom said, "the state of transition from conditions of oversaturated market into uranium deficit". He explained that having a global consumption of 60th tones of uranium, nearly 36 ths tones is produced in the world annually, hardly covering a half. The rest is satisfied at the expense of inventory stocks that are about to finish, as a result of which in the nearest years uranium deficit is expected. M.Djakishev assumes that weighted-average price of the main uranium sales must be a more real measure. The price based on spot sales, in opposite, is unstable indicator, he added. Under conditions of oversupply it falls, under deficit - rises indefinitely. The latter can be observed today, when the price of spot sales exceeds price on long -term contracts, confirming our prediction made in 2001 in the report at WNA conference in Toronto, when prices had reached the lowest level for the whole history of uranium market", - the head of the company stressed. However, at that time "this very statement of Kazakhstani nuclear engineers was taken into account skeptically". M.Djakishev noted that a sale by Kazatomprom of 20 tones of uranium was initiated with the purpose to test new mechanisms of trades at the exchange. Commenting further plans of the company on selling uranium through exchange, M.Djakishev told "if in 2004 we have some uranium for sale at spot market with volumes of extraction of 3100 tones, then starting from 2005, regardless significant production increase to 3700 tones, no spare uranium will be at hands. The whole volume of extractable uranium from this period is already negotiated for delivery under long-term contracts". Other world major uranium producers encounter similar situation, too, according to the head of NAC. "This year in Boston at conference held by World Nuclear Fuel Market association, I read our analysis of uranium sources aloud, which we classified into three groups", - the head of NAC added. According to M.Djakishev the first group of producers included those companies, which produce uranium as a by-product during gold or copper extraction process. The uranium price increase would not lead to increase of its production by those companies, because the largest quantity they can produce is linked to conjecture of prices on main products. According to him, this group includes companies from SAR and some fields in Australia. The second group consists of producers, whose production and economy is directly dependant on uranium prices, but expansion of extraction is limited by natural resources and internal policy of their countries. This group includes the USA, Uzbekistan, Russia, the Ukraine, Namibia, Niger, Czech Republic, Hungary, Argentina, Brazil, India, Pakistan, China and Australia. At last producing centers, which are not limited neither by resources, nor political factors, represent the third group when prices go up. They are only China and Kazakhstan. M.Djakishev noted that under rapid increase of demand circumstance, the main burden will be exposed on producers from the third group, or three companies to be exact - Cogema, Cameco and Kazatomprom, which extract uranium in these two countries. They will have to expand the production several times, and taking into account sluggishness of the mining production, it will take quite long time to cover the need of all atomic energy stations. Therefore, the best way-out for energy companies under conditions of predicted uranium deficit, M.Djakishev believes, would be a vertical integration with producers of natural uranium both for providing yourself with your own raw materials and for diversification of the supply. Moreover, the head of Kazatomprom stated that he do not call for price increase. For an industry, he said, "it is more important to form and reflect a stable price on raw materials". "Rapid price increases can influence a competitiveness of nuclear energy in comparison with other types of energy", - interviewed explained. Commenting currently observable price increase, M.Djakishev drew his attention at fact that the price increase is not caused by uranium shortage, rather it is a market's reaction to expectation of predicted deficit. Thus, he summarized, the industry currently "is in transition state from pseudo-market to a formation of a real market". "Only upon introduction of civilized market mechanisms, nuclear-atomic industry can find solution to its problems and enter a new phase in its development process", - M.Djakishev said. Kazatomprom is an operator of uranium import and export in Kazakhstan The company is included in the top four list of the world leading uranium mining companies (8% of total share). Kazatomprom consists of Ulbinskiy metzavod (UMZ, NAC possesses 90% of shares), Volkovgeologiya (90%), #6 Stepnoe and Central ore managements, MAEK- Kazatomprom LLP (energy plant), Institution of High Technologies LLP. Moreover, the company possesses interests in joint with foreign companies ventures Inkai, Katko, UKR TVS and Zarechnoe. In accordance with targeted aims Kazatomprom increased the volume of uranium extraction from 794 tones in 1998 to 2850 tones in 2002 [2003-10-17]