Pardon the pun but the price of uranium is going nuclear.
It has risen fivefold says the Mail today. In January 2005 it was trading at $20 a pound, this Monday it reached $125 a pound.
Well, it’s all coming together now for the nuclear industry. With climate change and energy security at top of the agenda, the world is warming to nuclear power and adding capacity.
Those in the industry must be almost giddy with the transformation - a complete rehabilitation from 1980s bad guy, to ‘naughties’ good guy...well, relatively. From yesterday’s emitter of toxic waste and near Armageddon- style accidents to efficient ‘clean energy’ provider and global warming goodie two shoes.
And a report today says that the total number of nuclear reactors around the world is set to increase by half. There are currently 442 reactors in operation presently according to the Mail but there are a further 250 new reactors under construction! China alone needs to build two reactors a year if it is to meet its 2020 target of providing a modest 4% of its electricity needs from nuclear power says the International Herald Tribune. And in other BRIC economies, India currently has eight nuclear power stations under construction and Russia three according to www.uxc.com.
In Britain, the aging nuclear power stations need rebuilding if they are to continue providing around 20% of our electricity needs. Soon to be ejected Prime Minister Tony Blair writing in the Times this week said of the nuclear option:
“We also need to consider what role nuclear power can play as a low-carbon source of electricity. Nuclear power accounts for about a fifth of our electricity, yet most of our nuclear power stations are due to close over the next 15 years or so. It is right that we consider how nuclear power can help to underpin the security of our energy supply without increasing our reliance on fossil fuels.”
Nuclear power is significant for the UK but still a minority part of the total energy mix. In other parts of Europe it is the dominant provider. France’s 59 nuclear power stations provide almost 80% of her electricity needs, in Belgium nuclear energy accounts for around 56% and in Sweden it is almost 50% says Kevin Kerr in MoneyWeek.
On the supply side, once abundant stocks of “yellowcake” (uranium concentrate used in preparation of the fuel for nuclear reactors) have dwindled as inventories have run down over many lean years. In 1996, 60% came from inventory. A supply scramble is now underway to meet the new demand. One of the biggest projects, Cigar Lake in Saskatchewan, Canada run by Cameco is predicted to supply 18m pounds a year, equivalent to 17% of world production when fully operational. That should help though news last October of a flood has led to a six month delay.
All this is good news if you have uranium to your investment portfolio. Is it a buy from here? Mmm, how much good news can an asset take? But an International Atomic Energy Agency report reckons demand will increase from 61,500 tonnes in 1997 to 75,000 tonnes in 2020. There could be mileage yet...
*** On the subject of energy security, Blair’s article in The Times specifically singles out Putin’s Russia for criticism:
“...we are now faced with countries such as Russia, who are prepared to use their energy resources as an instrument of policy.”
So headlines such as the one in today’s Times strike a nerve: ‘Gazprom tightens its grip on European energy’ as it buys a stake in a ‘strategic Austrian gas hub’. This gives it influence over a proposed pipeline. The Nabucco pipeline would by-pass Russia and connect Europe with gas supplies from the Caspian area and the Middle East. No surprise the project is opposed by the Kremlin and Gazprom chairman, Alexei Miller: “We see no resources for [the Nabucco project] and no gas reserves for it, either”.
*** More evidence of an end to the era of price deflation from today’s Times which reports manufacturers plan to put up prices at the fastest rate in more than 12 years. A threat not lost on the OECD which warns the Bank of England to ‘remain vigilant as inflation expectations have risen and output growth is likely to remain brisk’. A lack of spare capacity and the threat of wage rise pose risks the Paris-boffins warn.
Rob Mackrill For The Daily Reckoning
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