By Andrew Nelson

From July 2011 to July this year the uranium spot price range traded between US$55-US$50 per pound with no real signs of life. And just when everyone thought the price was about to head higher, it dropped below US$50 and headed steadily lower from July to November. Then the unexpected happened, the spot price started pushing higher towards the end of November. It may not be back up to US$50 yet and no one's brave enough to call a recovery, but at least the price is headed in the right direction for producers to feel at least a tiny bit of holiday joy.

As always, the price started heading higher about the same time brokers started downgrading forecasts for both uranium and uranium producers. Last week saw the run continue, with BA-Merrill Lynch turning more cautious on the uranium market. Here's the elevator summary from the report: headwinds in the near term will prove challenging for the sector.

BA-ML noted that the will they-wont they talk about Japan's nuclear reactor re-starts have been the main driver of the uranium spot price for more than a year now. Well, BA-ML now reckons only 70% of Japan's nuclear capacity will eventually come back on line. This compares to 87% previously. The revision sees the broker lower its 2012-14 price forecasts, with 2013 coming down from US$58 to US$53 per pound, while 2014 is expected to be at US$73, which is down US$2 from the previous forecast. Term price forecasts were also adjusted, with 2013 US$4 lower at US$59, while 2014 is down US$2 to US$71 per pound.

While the broker downgraded Energy Resources of Australia ((ERA)) to Neutral from Buy last week on lower prices and less favourable FX assumptions, the stock remains BA-ML's key pick in the sector. The analysts'