The present environment in the nuclear industry will lead to the perfect storm, creating never seen before uranium prices, in less than 5 years.
Just the facts
- 72 reactors under construction*. Construction typically last for many years, sometimes decades and some may never finish being built. Concentration of new plants is in Europe and Asia.
- 437 nuclear reactors operating*. Reactors in operation are getting older. More reactors are being upgraded and working past their original life expectancy due to economic reasons.
- Countries are worried about their environment, climate change/global warming, due to the burning of fossil fuels.
- Renewable/green energy such as solar and wind energy typically lowers baseline nuclear energy production and increases power from natural gas to balance the grid.
- Supply of warheads to use as nuclear fuel is coming to an end.
- New thorium based nuclear power is very promising and could replace uranium as a nuclear fuel in the not too distant future.
Analysis & Predictions
The Fukushima Nuclear disaster in 2011 created a massive imbalance in the nuclear and uranium industries. Plants were shutdown, new reactors were put on hold, the uranium mining industry was cut at its knees. 3 ½ years later, uranium demand is currently greater than the mined supply. Japan will turn their reactors back on. More reactors will come online in particularly in China and India where the need for clean, baseline power is the greatest. Old reactors will continue to run, as long as economically feasible and until other energy sources can be properly and economically utilized. Newly proposed reactors will not be built or completed due to ever ballooning capital costs and the potential of thorium reactors. With new reactors online, Japan restarting and old rectors continuing to run, current mining operations will not be able to ramp up production fast enough to meet demand. Thorium technology and renewable energy and lack of commitment for new uranium-based nuclear plants going forward will discourage any major new uranium mining projects.
These elements will all happen simultaneously, creating the perfect storm – a super-spike in uranium prices (in excess of $200 US$/lb). Although the spike will be temporary, it will rock the nuclear and uranium industries as much as the Fukishima disaster. From an investor’s point of view, a uranium asset bubble will ensue (similar to that of rare earth bubble in 2011), with all the media coverage and the frenzy of merger and acquisition activity. And just like all previous asset bubbles this one too will burst.
*Data according to International Atomic Energy Agency (www.iaea.org), October 8, 2014.
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