Will uranium ever be the new gold? Maybe... but not quite yet.
Despite its recent plunge to below $40 per pound, which is the
first time it has dipped that low since 2006, uranium inventories
remain plentiful in the US and Europe. But that could soon change.
The new low looks like a low-risk entry point, as the long-term
outlook for uranium is positive, supported by a renewed pro-nuclear
movement on the near-term horizon. In Japan, concerns about air
pollution and rising costs have quelled the nuclear opposition.
Recently a pro-nuclear government was elected, so Japan's 48
inactive reactors should come back online sooner than expected.
Also, countries including Germany and China are planning to
initiate new nuclear reactors and restart existing ones for the
first time since the Fukushima disaster. After the catastrophe,
shares of even the largest uranium explorers and producers like
), the "ExxonMobil of uranium," plunged 61% in less than a year.
With uranium recently falling to $39.50 per pound, buyers --
especially utilities -- are currently trying to take advantage of
the low spot prices. However, only a few small sales transactions
are going through, as sellers are resisting filling large orders
taken at such depressed levels. And in anticipation of Japan's new
pro-nuclear regulations taking hold, producers are also holding out
for higher prices in what could be a new dawn for nuclear power.
In Japan, a new energy policy went into effect July 8 and already
Tokyo Electric Power Co.
(TYO:9501) has filed with the nuclear regulatory authority to
restart two idle reactors. Four additional Japanese utilities are
expected to follow in Tokyo Electric's footsteps with applications
to be filed in the coming week.
In other countries, the anti-nuclear movement has also proved
expensive and environmentally counterproductive.
In China, the noxious air pollution situation seems most critical.
New York Times
headline said it all: "In China, Breathing Becomes a Childhood
Risk." To improve air quality, a
in China's installed nuclear capacity is expected by 2020; that
would represent the largest source of future nuclear demand
worldwide by far.
Prior to Fukushima, Germany was on track to reducing noxious
emissions to a record low. Then, in the wake of the disaster, eight
nuclear reactor plants were shut down. By 2012, carbon dioxide
emissions had increased to the point where some German utilities
started suing the government in opposition to rising electricity
costs and air pollution.
Using nuclear power to replace coal and gas power has prevented 1.8
million deaths globally since the 1970s and could save millions
more lives in future decades, concluded NASA researchers in
a recent study
The World Nuclear Association (WNA) estimates a uranium short fall
in future years, as rising nuclear demand requirements are forecast
through the next half century. A deficit of about 40,000 tonnes
uranium (tU) is
WNA's estimate for
2030; (2030 demand, 137,000 tU; 2030 primary production, 97,000
"We forecast spot prices to average above $60/lb in 2013 and north
of $70/lb in 2014 and 2015 before settling to $70/lb in the long
term," said David Sadowski, an analyst for Raymond James.
Current uranium stock buying opportunities include some of the
world's largest producers like those held by the
Global X Uranium ETF
(NYSEARCA:URA). Uranium producers and funds -- including
Uranium Participation Corp.
(TSE:U) -- should also benefit from a spot price rebound.