Uranium Update

The price of uranium per pound has fallen substantially from a peak midway through 2007 of about $140 to a recent trading range of $40-$50. Much of the fall can be blamed on the decline in electricity demand as the world moved towards recession. Nevertheless, the price of uranium has recently bounced, partly because of the disruption to supply and partly because of the expectation of a global economic recovery.

Now, here are three more forces that could drive the price of uranium higher going forward …

1. The use of nuclear power stations has been steadily increasing over the last decade. According to the World Nuclear Association (WNA), 53 are currently under construction with 135 planned and almost 300 proposed for the future.
2. We’ve had major interruptions of mine supply from two sources that were expected to be a lot more productive, BHP’s Olympic Dam and Cameco’s Cigar Lake mine. And mine production will need to rise by 30% over the next five years or so to keep up with demand.
3. In the U.S., nuclear power has been out of favor since the accident at 3-Mile Island, but it’s starting to regain support. The Washington Post reports that the Obama administration and leading Democrats, in an effort to win greater support for climate change legislation, are eyeing federal tax incentives and loan guarantees to fund a new crop of nuclear power plants across the United States. The U.S. Nuclear Regulatory Commission is reviewing applications for 22 new nuclear plants.

And here is a weekly chart of the Market Vectors Nuclear Energy ETF (NLR: 20.7989 +0.3489 +1.71%) …

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