Uranium Investing: Another Buying Opportunity?

The next few years should be good times for those that produce uranium, the feedstock for nuclear reactors

In looking at supply and demand, it seems clear that we’ll need more uranium than we mine now. At least if we expect to run all the power plants that are on the board. The World Nuclear Association (WNA) reports there are 50 nuclear reactors under construction around the world that’ll need some 23 million pounds of U308. (U308 is the oxide you get when you mine uranium ore.) There are 432 more on the planning board. Based on these projects, the world’s nuclear power production will more than triple from 2008-30.

Not surprisingly, China has a big role to play here. Its power needs are growing dramatically. China has only about a dozen reactors today, which supply about 3% of its power needs. But the growth curve is steep. The WNA says there are 15 more under construction, which will more than double China’s nuclear capacity. It has another 114 either planned or proposed. If everything gets built, that will be nearly a fourfold increase.

Also, I want to say a few words about the uranium mania of 2007, which cracked in 2008, along with most things. In 2007, there was certainly a uranium rush. Besides the small circle of established players that were actually producing uranium, there were over 750 exploration companies created to look for more. Almost all of these flamed out in 2008 as the uranium price sank and the credit crisis finished off the wounded.

Uranium Price Decline

Thinking in contrary fashion, it looks to me that uranium is due for an upturn. Investing well often requires you to buy what is out of fashion or what has done poorly. Uranium is a pretty good candidate, as the price of U308 has done nothing but fall since peaking in the summer of 2007.