Global Outlook

Uranium

Contributed by eResearch

By Bob Weir

We have stated many times in the Clarion that we are a long-term bull on uranium and uranium stocks. There was a recent flurry of price activity in uranium stocks in anticipation that the recovery in the price of uranium was finally at hand. This flurry ended abruptly last week as the price of U3O8 actually fell by US$0.50/lb. Uranium stocks have been out of favour for so long that it will not take much to send them upwards. If the next price posting (expected shortly) is an uptick, uranium stocks could continue their advance. If the uptick is sizable, uranium stocks could soar.

The International Energy Agency has forecast that global electricity generatedfrom nuclear power could triple over the next 40 years. This is going to require many more nuclear reactor plants to be built. Likewise, global decarbonization plans have led to many nuclear reactors that either have been commissioned to be built or are now actually being built in many countries of the world.

Currently, there are some 500 nuclear reactors planned or proposed globally. Another driving force in the uranium sector is the increasing role played by China. Its power consumption is increasing rapidly. Of the 50 or so nuclear reactors now under construction, China accounts for almost half of them. China has been involved in talks with France and Russia about co-operating in the  building of fourth-generation nuclear reactors. Chinese companies also have been active: one signed an uranium trade agreement with a Uzbekistan company to further uranium resource development; another formalized an arrangement with Cameco to buy 23 million pounds of uranium concentrate over the next ten years; and a third purchased an Australian uranium exploration company.

Demand and supply, of any commodity or service, is the primary component that drives prices. For uranium, there is long-term increasing demand. On the other side, supply is limited and is not increasing in lock-step. From start to finish, because of considerable government hoops to jump through, it takes about ten years, plus or minus, to bring a strike through to production.

The world needs more uranium exploration, development and, ultimately, production to meet the increasing global demand. With no large short-term increases in supply, as demand picks up, there is no place for uranium prices to go from here but up. There is an old investment adage: “Buy „em when no-one else wants „em.” This is so true for uranium stocks right now.