Uranium bottomed at “less than the cost of a pizza” – $7 per pound – in 2001 and then jumped to $138 by June 2007, says Seekingalpha.com. It then underwent a much-needed correction, and is now at around $57; this year it has underperformed all other energy commodities, sliding by 35%. The long-term outlook, however, is promising.
With oil and coal prices high, and global energy demand on the rise as Asia industrialises, the need for a cheaper and cleaner alternative to hydrocarbon-based energy is gaining acceptance, says Haywood Securities. According to the International Energy Agency, reducing carbon emissions to 2005 levels by 2050 would require around 960 new nuclear reactors on top of the 448 reactors currently in operation.
That may be a stretch, but demand for uranium is increasing with a 40% jump in the number of reactors planned or proposed worldwide between January 2007 and May 2008, according to Resource Capital Research. Two reactors are coming online this year in India, while China “is just on the verge of a second rapid phase of expansion”, says the World Nuclear Association. Nuclear power is also back on the agenda in Britain and America. Uranium consumption may jump by as much as 55% by 2020, reckons Macquarie Bank.
Mined supply has consistently failed to meet demand since the early 1990s, while secondary supplies – stockpiles and decommissioned weapons – are “rapidly being depleted”, says Deutsche Bank. Ongoing production problems and sliding stockpiles will soon prompt utilities to re-enter the market to secure supplies, helping to drive the price up: it sees the spot prices recovering later this year. Goldman Sachs JBWere Pty expects a rebound to $90.