Miners pressured as uncertainty sours uranium market

* Uranium spot price hits new 2-year low, miners' shares sag

* Idled Japan reactors weigh as politics unclear

* Uranium price seen stagnant to lower over next months

* Analysts expect recovery starting around Q2 2013

By Julie Gordon

TORONTO, Oct 5 (Reuters) - Eighteen months after theFukushima nuclear meltdown, the spot price for uranium hit atwo-year low this week, putting the squeeze on the alreadydepressed shares of uranium miners.

With a looming election keeping Japan from making a decisionon how much, if any, of its nuclear reactor fleet it will keep,and slowing growth in China weighing on the broader resourcesector, it will likely be months before uranium prices startmoving back toward pre-Fukushima levels.

"In the near term, the price of uranium is going to gosideways to down," said Raymond Goldie, a senior mining analystat Salman Partners in Toronto, adding that the spot price is notlikely to start recovering until March or April 2013.

That is bad news for producers Cameco Corp , UraniumOne Inc and Paladin Energy Inc , which havewatched their shares plummet since a massive earthquake andtsunami struck Japan in March 2011, crippling theFukushima-Daiichi atomic power plant.

Cameco, the world's largest publicly listed uraniumproducer, has lost more than 48 percent of its market value inthe aftermath of the worst nuclear disaster since Chernobyl.Uranium One is down 62 percent, while Paladin has fallen 72percent.

The uranium spot price hit a new two-year low this week at$45.75. That compares with the February 2011 average spot priceof $69.63.

Weighing on the commodity are the dozens of Japanesereactors idled since the Fukushima disaster. Just two of thenation's 50 working units are currently up and running.

While Japan's economics minister said Friday that reactorscan be restarted if the new nuclear watchdog deems them safe,the procedure for doing so is unclear, especially as the newregulator says its responsibility is safety, not restarts.

Adding to the uncertainty, Japan's cabinet announced a newenergy policy last month that aimed to end reliance on nuclearpower by the 2030s, but industry lobbies called for a rethinkand within days lawmakers appeared to waiver on the commitment.

With a general election due within months, a major decisionon the nation's nuclear future appears unlikely in the nearterm, and worries are mounting over how utilities will deal withexcess uranium inventories.

Still, there is a glimmer of hope on the horizon forembattled uranium equities. There are currently more than 60reactors under construction around the world, 26 of which are inChina, according to the World Nuclear Association.

Before Fukushima, Beijing was working on plans to boost itsnuclear capacity to more than 80 gigawatts by 2020. Thosetargets are expected to be lower now, but still substantial.

The atomic expansion in China, and new builds in SouthKorea, India and Russia, come as the supply side of the equationfaces a serious crunch.

With costs soaring across the mining industry, new uraniumprojects, which analysts believe are needed to meet futuredemand, are being stalled or shelved indefinitely as the saggingcommodity price makes building mines uneconomic.

BHP Billiton has delayed an expansion at itsOlympic Dam mine in Australia, while Cameco recently shelved itsKintyre project, also in Australia, noting that developmentwould require a uranium price of $67 to break even.

Cameco has also taken a more cautious tone on its plans todouble uranium production to 40 million pounds a year by 2018,noting that growth will not come regardless of cost.

"Lower commodity prices have led producers to increasinglyshelve projects until higher prices rationalize increasedsupply," Daniel W. Scott, a New York-based analyst at DahlmanRose, said in a note to clients.

Scott added that over the medium term the delays will likelyhave the desired effect of boosting uranium pricing.

Also, Russia's so-called "Megatons to Megawatts" program, inwhich weapons-grade uranium is converted into nuclear fuel, willend in 2013, and that could help tighten the market.

"I'm not expecting a super-squeeze, but I am expecting asqueeze," Goldie said. "And there is a delayed reaction to that,because there seems to be enough material on the market rightnow thanks to the Japanese utilities."

(Reporting by Julie Gordon; Editing by Peter Galloway)

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