Ever since the Fukushima meltdown, things have not been going well for uranium, and the incident has caused other countries to scale back nuclear aspirations.
Currently, uranium prices are around $40 per pound – a long shot from the glory days of over $130 per pound just eight years ago. In order for producers to make higher profits, prices would have to be at least $70. If things don’t change soon, we could see mine closures around the world.
But 2014 will be a better year for this reason.
Analysts are predicting prices will rise to $138 in the short-term. Uranium investors may have become somewhat jaded over the years, but things look promising.
For one thing, a deal under which Russia has been supplying leftover nuclear warhead material to the U.S. for energy conversion will soon come to end. This will play a role in leaving behind a large supply gap that will spike uranium prices.
China and India are also two growing nations searching for clean energy. The Chinese government is on a campaign to reduce smog emissions, and the amount of coal pollution that kills Indians every year is alarming. Because of this, these governments are searching for clean sources of energy, and nuclear is one of them.
Uranium is Making a Comeback
Uranium is expected to undergo a supply constriction, and demand is expected to surge past output. Nuclear plants will need 65,000 tonnes of uranium, but miners will only be able to supply 58,000 tonnes. And this rise in demand has to do with developing nations. According to projections, demand for electricity is expected to rise by 75 percent by 2035.
Even though Japan is still reeling from the nuclear disaster, Prime Minster Shinzo Abe is not giving up on nuclear power – demonizing those who want to strip the country’s nuclear base. And as much as many in Japan would like to leave nuclear power behind, it is still has no other major source of energy to take its place. Japan is in the middle of developing alternative sources of energy, but it imports heavily.
Because of this, nuclear energy will one day make a comeback in the island nation.
And I would watch out for Canada as well. Japan may be a high-demand nation, but Canada will keep the supply chain going. And since Japan and Canada are fostering greater business ties, this could beginning of a lucrative relationship within the nuclear world.
Canada is a friendly haven for uranium mining. The North American country provides 16 percent of the world’s uranium within the Athabasca basin, and the Athabasca is expected to double production by 2020, which will be the perfect time as world energy demand increases.
Canada is already a hotspot for investing, and there are numerous bidding wars for land in western Canada.
Canada will soon become the number one nation for uranium, and it is currently second only to Kazakhstan. But I would try and keep an eye on the Central Asian nation as well. Kazakhstan is looking to meet higher international demand for energy and compete with the Canadians by ramping up production.
But Kazakhstan is waiting for new markets and higher demand before ramping things up.
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Nuclear or Miners?
When it comes to the issue of whether to invest in nuclear plants or mines first, it is best to go with miners. The Athabasca region, a valuable landscape where the best uranium mining companies are digging, is gaining fast traction.
Companies including Denison Mines Corp. (NYSE: DNN), Areva (OTC: ARVCF), and Cameco Corporation (NYSE: CCJ) are looking into invest further in the Athabasca. Rio Tinto (NYSE: RIO) has also been sniffing around for more uranium around the world.
Nuclear power’s time will eventually come, but not yet. Wait until Japan’s nuclear efforts heighten, and you’ll begin to see more international comfort with nuclear power as a whole.
And keep an eye out for Wyoming as well, where Cameco and Uranium One (TSE: UUU) are looking to satisfy demand in the U.S. as the Russian deal comes to an end. U.S. miners are looking to cover the 24 million pound supply gap that the U.S. will face.
As uranium miners scramble to supply demand in the U.S. and new nuclear facilities around the world, you can expect prices to rise in the future.
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