Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Uranium Prices And Producers Are Poised to Rebound

Commodities / Uranium Apr 04, 2011 - 05:24 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleJason Simpkins writes: Uranium spot prices and shares of uranium mining companies have plunged in recent weeks amid fears that the situation in Japan could deteriorate into a nuclear meltdown on par with Chernobyl.

Investors fear that the explosion and subsequent radiation leaks at the Fukushima nuclear power plant will force other countries to tighten restrictions, or worse, abandon their pursuit of nuclear power as an alternative source of energy.


But what if no such thing happens? What if the nuclear fallout in Japan remains relatively contained, and other countries around the world move ahead as planned with their atomic energy projects?

Then uranium prices would bounce back from their current level around $60 a pound to their pre-Japan crisis highs of $73 a pound. And that would just be the beginning, as higher oil prices, concerns over carbon emissions, and soaring demand for nuclear energy could drive uranium prices back up to $90, or even $140 a pound as seen in 2007.

That's precisely the scenario industry insiders have in mind.

Indeed, those closest to the situation do not believe that Japan's disaster will be the death knell for nuclear power. On the contrary, they see it as a short-term blip that will drive antsy speculators out of the market and make room for investors looking to profit from the energy of the future.

"It's going to move irregularly up. By around 2013 we'll be looking for at least $90 US per pound," Patricia Mohr of Scotiabank Group told the Business News Network. "Mostly because of a doubling of China's nuclear objectives over the coming decade."

Powering Ahead
The price of uranium oxide, the most commonly traded form of the nuclear fuel, plummeted 27% to about $50 a pound in the spot market in the days following Japan's earthquake and reactor explosion.

But since then, the spot price has rallied some 20% to more than $60 a pound - showing that many investors see uranium's dip as a buying opportunity.

And why shouldn't they?

Solar, wind, hydro, and geothermal energy are too underdeveloped to take the energy mantle away from oil and natural gas. So there is still a gaping need for an alternative energy source that doesn't carry the monetary or environmental cost of fossil fuels. And despite the catastrophe in Japan, many countries plan to expand their nuclear energy programs following a relatively brief review of safety regulations and protocol.

"It's not like the world' s major energy issues have been in any way solved by first-hand reminders of the dangers of nuclear power," Katy Payn, a Sydney, Australia-based political risk manager told Xinhua. "That danger has always been there, this is merely a wake-up call."

U.S. President Barack Obama just last week said that nuclear power would continue to play a role in U.S. energy policy.

"It's important to recognize that nuclear energy doesn't emit carbon dioxide in the atmosphere, so those of us who are concerned about climate change, we've got to recognize that nuclear power, if it's safe, can make a significant contribution to the climate change question," President Obama said last Wednesday. "We're going to incorporate those conclusions and lessons from Japan in design and the building of the next generation of plants. But we can't simply take it off the table."

And then there's China.

China is the world's largest emitter of greenhouse gases. It's also undergoing a rapid modernization that has seen millions of workers flood its cities in search of factory jobs.

China seeks to employ solar, wind and hydropower to fuel its expansion, but nuclear power remains a priority as well.

As it stands now, China has 13 working reactors with a generating capacity of 10.8 million kilowatts, and 32 reactors capable of producing 30.97 million kilowatts under construction.

The State Council said on March 16 that it would stop approving new nuclear plants "until safety and improved long-term development plans are cleared." But the country still plans to begin construction on a state-of-the-art nuclear plant this month.

The fourth generation plant will use gas for cooling instead of water.

"There are differences between the Japanese and Chinese reactors," Cui Shaozhang, deputy general manager at Huaneng Nuclear Power Development Co. told Bloomberg News. "Japan's Fukushima plant was using old technology while Chinese reactors are more advanced."

China's 12th Five-Year Plan targeted 42.9 million kilowatts of nuclear power generation capacity by 2015 and 100 million kilowatts by 2020. Concerns about a potential meltdown forced authorities to back off that target, but not in a major way.

Wei Shaofeng, deputy director of the China Electricity Council, said he believes the central government will reduce its 2020 target by just 10 million kilowatts - if it makes any adjustment all.

Meanwhile, China will be joined by other Asian countries that see nuclear power as a viable substitute for coal-fired power plants.

India, for instance, is sticking to its plan for a 13-fold increase in nuclear energy capacity by 2030.

"You can see rapid growth in nuclear installed capacity in India and China, notwithstanding the events in Fukushima," said Michael Parker, a Hong Kong-based analyst at Sanford C Bernstein & Co. "The cheapest, most easily scaled, cleanest, and most technologically mature source of electricity for these economies is nuclear."

The planned increase in atomic power would bring the Asian nations to 30% of the world's total from the current 4%, according to Sanford C Bernstein & Co.

"Asian nations will be thinking about how to meet electricity demand, which is always rising," Hiroshi Miyata, chief executive officer of Marubeni Power Development Co., a builder and operator of power stations outside Japan, told Bloomberg. "It may slow construction of nuclear plants, but investments will probably continue."

A Buying Opportunity
Indeed, the growth prospects for nuclear power remain strong, as do the prospects for its yellow cake fuel.

In fact, uranium demand will grow by 33% in the next decade to correspond with projected growth in nuclear reactor capacity, according to the World Nuclear Association.

"There's still a strong demand globally for uranium," Greg Hall, managing director of uranium exploration company Toro Energy Ltd. (PINK: TOEYF), told The Australian. "There's 440 operating reactors, there's approximately 60 under construction - even if there's a freeze for a few months on new builds... that doesn't mean a massive slowdown in the industry."

Toro isn't the only uranium miner unfazed by what's perceived as a temporary setback in the price of uranium.

Cameco Corp. (NYSE: CCJ), the world's second largest uranium mining company, is moving ahead with plans to double production to 40 million pounds a year by 2018.

"We see no reason to slow down the doubling of production," Cameco Chief Executive Officer Jerry Grandley told Reuters. "Even if there is a pause or slowdown (in the nuclear plant buildout) as expected."

Current global uranium demand is about 180 million pounds a year, while mine output stands at about 140 million pounds, according to Reuters.

"My sense is, given all those pieces, there isn't going to be much of a change in the supply and demand imbalance that we have, and in the need for new projects to come online in the next decade," said Grandley.

Still, shares of uranium producers have been hard hit in the wake of Japan's struggles. Cameco and Uranium Resources Inc. (Nasdaq: URRE) have each plunged some 25% in the past month, while shares of Uranium Energy Corp. (AMEX: UEC), an exploration-stage company, are down 28% in that time.

Many analysts say these declines are a good chance for opportunistic investors to cash in.

"With share prices falling it makes it more difficult to finance mines. But by the same token, so long as the uranium price doesn't stay down too long, it means there's great opportunities for investors to buy stocks at these levels and it's a price that I didn't think we'd see again," Warwick Grigor, executive chairman of BGF Equities, told The Australian. "The market has come off 50% since January and for anyone who can think more than one or two months ahead, then I think it's a great buying opportunity for Australian uranium companies."

Of course, it's not just Australian producers that could see a sharp bounce back.

Analysts project an average advance of 82% for the uranium companies in the Global X Uranium ETF (NYSE: URA) that have 12-month price estimates, according to data compiled by Bloomberg.

The Global X Uranium ETF is down 27% in the past four weeks.

"You're offered fundamental upside if you believe the sell-off in the uranium stocks is overdone," said Andrew Ross, partner and global equity trader at First New York Securities LLC, told Bloomberg. "The Chinese are taking a very long-term view of their energy needs and they have to incorporate some element of nuclear power into their plans. You just have to overcome the headwinds of the Japanese issues."

Source : http://moneymorning.com/2011/04/04/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in