(Bloomberg) China is buying unprecedented amounts of uranium, signaling that prices are poised to rebound after three years of declines.This is a great report by Bloomberg, with lots of research and original data.
The nation may purchase about 5,000 metric tons this year, more than twice as much as it consumes, building stockpiles for new reactors, according to Thomas Neff, a physicist and uranium- industry analyst at the Massachusetts Institute of Technology in Cambridge. Prices will jump by about 32 percent next year, the most since 2006, RBC Capital Markets said.
India and China are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies growing more than twice as fast as Europe and North America. The boom, combined with slowing supply growth, may benefit Cameco Corp., a co-owner of the world’s largest uranium mine, and Areva SA, the largest builder of reactors.
Uranium has tumbled 69 percent since peaking at $136 a pound in July 2007 as companies boosted production, according to the firm’s data.
The cost of mining one pound of uranium is about $31, up from $26 in 2007, according to Edward Sterck, an analyst at BMO Capital Markets in London.
China’s demand for uranium may rise to 20,000 tons a year by 2020, more than a third of the 50,572 tons mined globally last year, as it boosts output to 85 gigawatts, nine times its current capacity, according to the World Nuclear Association. The nation agreed on June 24 to buy more than 10,000 tons over 10 years from Cameco.
India’s needs will grow 10-fold to 8,000 tons as it quadruples capacity to 20 gigawatts, according to Jagdeep Ghai, finance director at state-owned Nuclear Power Corp.
“They are essentially stockpiling in anticipation of new reactor build,” Neff, who is an independent director of GoviEx Uranium Inc., a privately held exploration company with interests in Niger, said in a July 6 telephone interview. “They are stockpiling like crazy.”
China plans at least 60 new reactors by 2020, Xu Yuming, executive director of the China Nuclear Energy Association, said in Beijing on July 6. The average 1,000-megawatt reactor costs about $3 billion, according to the World Nuclear Association. Loading a new reactor requires about 400 tons of uranium to start, Neff said.
Companies that build reactors may be among the biggest beneficiaries. Areva’s shares have tumbled 53 percent in the past three years. Miners including Cameco, whose stock has fallen 60 percent since then, Paladin Energy Ltd., which has lost 63 percent, and Darwin-based Energy Resources of Australia Ltd., which is down 25 percent, may also benefit.
Commissioning new plants is a “game-changer” for uranium, said Mark Pervan, head of commodity research at Australia and New Zealand Banking Group Ltd. in Melbourne. Though many won’t come on line for as long as two years, “speculative interest” may drive prices to the “$60 to $80 range pretty quickly.”
Jim Puplava over at Financial Sense has picked up on this, and interviews James Dines, along with a couple other guests specifically about Uranium. Quite an interesting interview, definitely worth listening to. Here's the direct link to the MP3 file.