Uranium Mining Looking Positive Despite Recent Price Drops

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Ferrous Metals, Supply & Demand

Atomic power may not be very popular in the US but there are still over 100 nuclear power generation reactors in operation and more are planned. New plants will begin construction shortly for completion in the middle of the next decade in Texas, Maryland, Alabama, Virginia and South Carolina. Some $2b has been spent over the last few years on new reactor designs and feasibility projects, underlining the industry’s belief that nuclear power will continue to generate at least the current 20% if not more of US electricity consumption in the years ahead.

Unfortunately the cost of Uranium has been as influenced by speculative activity as other commodities as investment funds bid the price up to over $130/lb and then during the autumn credit crunch promptly dumped positions as the price slumped to $45/lb. It has since recovered closer to the contract price of $70/lb; down itself from last year’s $90/lb. With so much of the world’s reserves in countries like Russia and Kazakhstan, it is not surprising political factors influence the price (as we have seen with oil and gas supplies, energy is seen in the Kremlin as much as a political weapon as it is an economic resource). It remains to be seen whether growth plans in Western Europe and Japan materialize as completed projects. The availability of credit to meet the massive up front capital cost will be as big a factor as the price of raw material or public enthusiasm for nuclear power. Russia and Kazakhstan are both investing heavily in expanding uranium production looking at Asian power station construction plans as justification for their belief in growing demand. Expansion plans in Eastern Europe, Australia and Canada should maintain the growth of supply and keep prices competitive. Though the drop in steel and metal prices has a beneficial effect on construction costs for all kinds of power generation, it has a proportionally higher effect on the high capital cost nuclear plants improving the economics of nuclear power and keeping it relevant even in a low oil price environment.

–Stuart Burns

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