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« Brian Uhlmer: Drill Bits | Main | Taylor MacDonald: Bullish on Unconventional Oil Plays »
Sunday
Apr242011

The contrarian case for Uranium is compelling

yellow cake 25 April 2011.JPG
Yellow Cake

Uranium prices have slumped. In the wake of the disaster at Japan’s Fukushima Daiichi nuclear plant, the price of a pound of uranium on international markets has tumbled all the way down to about $56.50, compared to $73 in early February. A few years ago it briefly topped $130.

Uranium has tumbled while oil has been booming. Today you can get two pounds of uranium for the price of one barrel of West Texas Light crude.

And yet the world needs energy. More and more of it. According Jonathan Hinze, vice president for international operations at uranium specialists UX Consulting, you need 10.4 barrels of oil to generate the same amount of energy as one pound of uranium. It’s not quite as simple as all that, but the comparison is not a facile one either.

You make money in this business by buying low and selling high. It’s easier said than done, of course. When things are low, nobody wants them.

It’s easy to see a bear case for uranium — or, at least, a case for this sharp sell-off. Fukushima has cast another cloud over the public image of the nuclear power industry. It is harder to sell the idea of more reactors — here or overseas. China has scaled back some nuclear plans and is reviewing safety issues. Germany is speeding up its move away from nuclear power altogether. Japan was forced to raise the level of its nuclear disaster to the same as Chernobyl. The headlines are terrible.

All this is known. It may already be reflected in the price of uranium.

But there is another side of the story.

The world may not like nuclear power, but it probably doesn’t have the luxury of going without it either. Energy needs are soaring. BP’s latest analysis predicts 40% growth over the next twenty years. Forecasts are always questionable. We can argue about the number, but hardly over the direction. We already know the story. In Asia and in other emerging markets, hundreds of millions of people are moving from the peasantry to the industrial middle class. They want cars, air conditioning, flat screen TVs and vacations abroad.

We’re going to need a lot more energy, from pretty much every source we can find. Coal, natural gas, oil, wind farms, solar paneling, and, barring miracles, nuclear reactors. No matter what you think of renewable and clean energy, nobody thinks they can provide all the answers.
The Chinese know this. They have trimmed expansion plans from 90 new reactors to 70, says Hinze, but they are still expanding. The same goes for other countries as well. The Germans are able to be so “green” at home, says UXC’s Jonathan Hinze, partly because they are able to buy some of their energy from nuclear France.

But there is another side of the story.

The world may not like nuclear power, but it probably doesn’t have the luxury of going without it either. Energy needs are soaring. BP’s latest analysis predicts 40% growth over the next twenty years. Forecasts are always questionable. We can argue about the number, but hardly over the direction. We already know the story. In Asia and in other emerging markets, hundreds of millions of people are moving from the peasantry to the industrial middle class. They want cars, air conditioning, flat screen TVs and vacations abroad.

We’re going to need a lot more energy, from pretty much every source we can find. Coal, natural gas, oil, wind farms, solar paneling, and, barring miracles, nuclear reactors. No matter what you think of renewable and clean energy, nobody thinks they can provide all the answers.
The Chinese know this. They have trimmed expansion plans from 90 new reactors to 70, says Hinze, but they are still expanding. The same goes for other countries as well. The Germans are able to be so “green” at home, says UXC’s Jonathan Hinze, partly because they are able to buy some of their energy from nuclear France.

This Article is Courtesy of MarketWatch.


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sk charts 19 April 2011.JPG


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Reader Comments (1)

it also should be pointed out that the french reactors are sitting at the border with Germany

April 25, 2011 | Unregistered Commenterrolf voigt

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