The only cure for low prices is low prices. That old adage has been at play for some time in Saskatchewan’s resource industries.
It was abundantly clear again yesterday with Cameco’s announcement that it will suspend operations at a couple of its mines for most of next year.
This is tough news for an industry and a region that has been feeling the pinch ever since the earthquake and tsunami that took a Japanese nuclear station out of production.
Prices have been low and demand is below output so Cameco, among the biggest payers in the uranium business, has decided to stop building its inventory. That means shuttering a couple mines for at least ten months beginning in January and it will cost jobs across much of the province but especially in the North.
The point of the exercise is to reduce inventories which will provide some lift to prices. Low prices lead to production cutbacks which in turn open the door to price increases. Low prices trigger decisions that ultimately cure low prices.