When it comes to uranium, the commodity has received a fair amount of negative publicity in the news. There was the Fukushima disaster back in 2011 – a nuclear disaster akin to Chernobyl. And with word getting out that contaminated water from Fukushima had been leaking into the ocean, nuclear power will continue to receive a degree of scrutiny.
The meltdown has sparked quite a response from the Japanese government, which essentially shut down all of Japan’s reactor cores. There was reaction abroad as well, with nations like Germany turning away from nuclear power and focusing on renewable energy sources like solar.
And then we constantly hear of Iran’s uranium enrichment program in the news and the numerous sanctions that are crippling the country.
Uranium itself is not doing too well on the market either, with current prices at $35 per pound – not enough to invigorate miners to keep digging for the commodity. According to experts, half of uranium production in the world is not profitable at $35. A minimum spot price of $40 would be decent enough to spur more production.
But there is a ray of sunshine.
While falling below $40 is bad news for the uranium industry, experts like Rob Chang from Cantor Fitzgerald Canada Metals and Mining believes uranium prices will eventually pick back up.
No one knows when or how high prices will go, but if the uranium industry can get out of the $30 range and beyond $40, this will be enough to keep up healthy production.
Part of the reason we’ve been seeing a drop in uranium prices for the past two years has to do with the fallout from the Fukushima disaster and the negative reaction we have seen from other countries around the world. Also, the primary buyers of uranium are utility companies, and many of them are well stocked for the time being.
But as their supply begins to dwindle, demand may pick back up from the utility sector later this year or into 2014. Chang believes there will be 184 million pounds of uranium demand, with supply falling around 179 million, as he told Uranium Investing News.
This falling supply and rising demand is expected to peak in 2020, when many new nuclear reactors around the world will go online. Parts of the West and Japan may have given up on nuclear for now, but China, India, Russia, and the United Arab Emirates are investing in new reactors.
According to Reuters, China has 29 reactors being constructed, Russia has 10, and India has seven.
China is one of the world’s largest investors in nuclear – largely as a result of a campaign to reduce the amount of smog emissions from coal-fired plants. The Chinese government is banning new coal plants in some of its major cities and placing more of an emphasis on natural gas and nuclear power.
China’s heavy usage of nuclear power will play a role in rising uranium spot prices.
Lagging supply is expected to last throughout the decade, but it could skyrocket to a 20 million pound gap by 2020.
When it comes to U.S. needs, there is already a supply gap. Nuclear power needs have been met through the Megatons for Megawatts project – which saw the conversion of 20,000 Soviet nuclear warheads into depleted uranium for U.S. nuclear power – but the deal is set to expire at the end of this year, with no signal of renewal. Demand for nuclear power is expected to reach 50 million pounds, but the U.S. only procures five million pounds in mining production.
Though the U.S. is the largest consumer of nuclear power, we do very little in the way of uranium mining. The U.S. will have to increase its uranium imports in the future; however, there will be more import demand coming from other nations that have invested in nuclear power as well.
The Chinese are already purchasing large stockpiles, and if these new nuclear reactors are built according to schedule, uranium resources will heighten in value stemming from scarce supply, as China and Russia crave more imports and seek higher production from around the world.
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Where are the Best Places for Uranium Mining?
Look to Australia.
The country is home to about one-third of the world’s uranium, and it produces ten percent of the world’s needs. But it is not only the reserves that make Australia an attractive venture. The permissive climate of uranium production makes this a perfect atmosphere for uranium investment.
The national government approves of uranium production, and so do the local governments of South Australia and West Australia – home to some of the richest uranium reserves in the nation, Reuters reports.
Companies delving into uranium out in Australia are BHP Billiton (NYSE: BHP) and Toro Energy (ASX: TOE). BHP has successful operations in Australia, with two more mines in development. Toro, on the other hand, is on a rocky course, struggling to find $250 million in financing and looking to begin operations in 2016.
Another active company to watch for is Rio Tinto (NYSE: RIO) – a company that has conducted uranium mining across the world.
Canada is another nation to watch for in uranium mining, with the Athabasca, Angikuni, and Thelon Basins being three prosperous areas.
And watch out for Kazakhstan, coming in at 33 percent in world uranium production. The country plans to increase uranium production from 17,000 tons to 25,000 tons to ramp up domestic production in response to impending higher demand within the next few years.
Uranium is in the same predicament as natural gas currently, with prices being too low to spur a greater amount of production. But its time in the spotlight will come as more nuclear reactors come online and as Japan begins to rebuild its nuclear sector.
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