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Investing Ideas Investing in Uranium: The Demand Side
Investing Ideas Investing in Uranium: The Demand Side 
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Prices for Rice Futures in Chicago One of the basic tenets of Material Profits is that as emerging-market participants become affluent they will consume. Here’s a chart of the prices for rice futures in Chicago. Rice is up over 100% year-to-date -- and it is likely to go higher. |
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| Investing in Uranium: The Demand Side |
| Tuesday, 25 September 2007 | ||||||||
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While many commodities markets have been in bull runs over the past few years, uranium has been on a tear. Between 2000 and its June 2007 peak, the price of uranium shot up from around $7 per pound to $135. Then this summer, the spot price almost halved. Some blame unsavory speculators for uranium's roller coaster ride. But it is better to blame the laws of supply and demand. After taking a look at both sides of the equation, it's hard to argue that the uranium bull will slow down for long. Uranium had its heyday during the Cold War. But after the Cold War, nuclear arms production ground to a halt. Uranium harvested from dismantled nuclear weapons meant that there was enough of the stuff around to feed existing reactors for many years. As a result, uranium prices slumped and it became economically unfeasible for companies to invest in new mines. Thirty years of underinvestment, strict regulations, and an overall lack of exploration for uranium deposits meant that commercial stockpiles dropped 50% between 1985 and 2003.
Today, uranium producers are meeting just 60% of total annual demand -- the balance supplied by decommissioned nuclear weapons. And even that's 80% gone. In 2006, the world's nuclear reactors used 173 million pounds of uranium. Yet uranium mines only supplied 103 million pounds. In the United States alone, consumption of uranium outpaces U.S. production by more than 20-to-1. And all of this is happening just as demand for uranium is picking up. About 16% of the world's electricity comes from 440 nuclear reactors. In the past 12 months, the number of proposed nuclear reactors has risen by 67% to 256 as governments across the globe turn to nuclear energy as a way to cut carbon emissions quickly and painlessly. Currently, there are 28 reactors under construction around the world by familiar names including Japan, China, India and Russia. China alone plans to build two new 1,000-megawatt nuclear reactors every year. Other Asian countries are getting into the act as well. Indonesia, Vietnam and Thailand each plan to build their first nuclear-power plants in the next few years. The Philippines and Malaysia are also considering entering the nuclear fray. By 2050, scientists estimate the world will need about 900 more nuclear power plants to keep up with growing energy requirements. Sincerely, Nicholas A. Vardy Editor, The Global Guru Also Read To find out the name of these, and some of my other red hot picks, sign up for a 60-day trial subscription of Global Bull Market Alert today .
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