Uranium: glowing with the flow works for bulls

uranium glowing with the flow works for bulls

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The world needs nuclear energy. This may still be unpopular with the public, but is widely accepted in the commodity market. Uranium prices (U3O8) have climbed more than a quarter to $65 per pound in the past six months. Noisy bulls have put their money where their mouths are.

Getting carbon-based fuels out of the electricity generation system requires more than wind and solar farms. These have too much supply intermittency. Plain, steady state generators can provide the balance of electric power needed.

Nuclear, despite the long build times, costliness and safety concerns, should win out. Since 2000, the number of operating reactors has fallen slightly. But by 2030 there should be another 32, mostly in China, according to Liberum data. Each new reactor in China needs more than 100 tonnes of the mined U3O8 equivalent.

That growth plus life extensions for US nuclear power plants means demand should exceed supply from 2025.

Speculators in Canada’s Sprott Physical Uranium Trust and UK-listed Yellow Cake, which buy and hold uranium, have squeezed up prices in a thinly traded spot market.

But nothing offers a klaxon alert for a commodity like a supply crunch. The world’s two largest uranium producers, Kazakhstan and Canada, together account for 58 per cent of output. Close Russian ally Kazakhstan did supply some western buyers, but Russia has since blocked its obvious export routes. Others are costly, says Robert Crayford of Geiger Counter Investment Trust.

Toronto-listed Cameco, Canada’s miner of uranium, has sold all its output years ahead. Other big producers, Australia and Namibia, are in slow run-offs. That is why a July coup in Niger, which accounts for just 4 per cent of world uranium supply, lifted prices.

If uranium rises much higher, say much above $70, that should encourage miners to lift output. Almost every supplier in the world would then be producing above their cash costs. That is good news for long-term buyers, less so for speculators.

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Financial Times

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