3 major catalysts are slated to push uranium prices skyward…learn why investors need to act now before the ship leaves the dock…
As we head into the final quarter of 2013, the uranium resurgence that many anticipated (myself included) still has yet to materialize.
For the past year, uranium prices as well as most other metals have remained depressed – and as of last week, uranium has dropped to a low of $35 per pound.
Yet despite sinking to a fraction of its 2007 peak, I still firmly believe that a major uranium rebound is imminent… and for 3 very bullish reasons.
If you recall, the US-Russia Megatons to Megawatts program headed into its 20th and final year in 2013.
When the Soviet Union collapsed in the early nineties, Megatons to Megawatts was devised to inject money into a crippled Russian economy and to help draw down the country’s vast nuclear weapon arsenal.
To date, over 19,000 Russian nuclear warheads have been safely dismantled, which has equated to over 475 tons of highly enriched uranium (HEU) recycled in the past two decades.
In turn, the HEU has been converted into 13,723 tons of low enriched uranium for use in US nuclear reactors to generate electricity.
The amount of uranium extracted from the weapons each year has helped to supply 10% of our country’s electricity annually, which equates to power for roughly 31 million Americans.
The goal of the program is to recycle 500 tons of uranium by the end of the 20-year agreement, or around 20,000 nuclear warheads.
Where I had previously written that the program was set to expire this past June, more accurate recycling numbers now indicate a December 2013 wrap up date.
That means that by the end of this year, US reactors have little choice but to source out new uranium supplies to make up for the looming shortfall, which will have a bullish impact on uranium prices.
That said, replenishing domestic demand alone isn’t likely to push uranium prices back up to pre-recession levels.
With an energy mix as diverse as what we have here in America, uranium isn’t garnering the same cache as it used to — despite the fact that there are still over 100 active commercial reactors powering our great country.
Construction of new plants here has flat-lined since the 1980s and aging reactors are gradually being shutdown.
For the rest of the world, nuclear energy remains a vital and growing power source — especially for countries that aren’t as blessed with natural resources as we are.
Last year, the world’s 435 active reactors consumed approximately 180 million pounds of uranium — no small feat considering this number excludes the 50 reactors still idle in Japan as well as some in Germany following the 2011 Fukushima disaster.
But the US nuclear energy limbo and Fukushima have done little to faze the long-term outlook for global nuclear needs.
According to the World Nuclear Association (WNA), 68 reactors are currently under construction, with the first of the new reactors set to come online as early as 2015.
The construction pipeline includes 28 in China, 10 in Russia, 7 in India and 5 in South Korea, the WNA states.
As a result of all these new plants on the horizon, uranium demand is expected to rise by 48% in the next ten years.
Compounding the problem is the dearth of current mining production.
The WNA says that current uranium output from mines only meets 86% of global demand for power generation.
Furthermore, a recent scientific study by Swiss-based Institute of Particle Physics (IPP) predicts that global mining of uranium will peak at 58,000 tons in 2015.
By 2030, IPP believes production will fall to 41,000 tons.
Such a shocking disruption of the supply and demand balance is almost certain to blast uranium prices through the roof – which is why major producers like Areva SA (PAR:AREVA, OTCMKTS:ARVCY) are urging investors to buy uranium now while prices have plunged.
If I were you, I would definitely take Areva’s advice to heart.
Of course, it pays to be mindful of the near-term challenges posed by our government’s current financial woes…so don’t be surprised if we see uranium fall even lower from now.
But the fundamentals for uranium’s upside are on autopilot.
As global production peaks, as new reactors come online, and as the Megatons to Megawatts program winds down, look for uranium and uranium stocks to finally hit their stride in 2014.
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