Uranium Prices Could Reach New Highs as Japan Recovers from Nuclear Disaster
The nuclear crisis in Japan has caused many changes for the country and for the global economy. Analysts are keeping watch over certain goods and materials, but nothing has been more widely discussed than uranium. Despite the incident, analysts expect spot uranium prices to reach levels that were seen in Japan prior to the nuclear crisis. Amir Adnani, the Chief Executive Officer of Uranium Energy Corp. (AMEX: UEC), a U.S.-based company, said that demand for the ore remains intact, and as such, prices of spot uranium could continue to rise to reach new highs.
In his interview, Adnani noted that spot uranium prices reached an all-time high of $140/lb in July of 2007, and stated that, “There is no reason why prices shouldn’t reach all time highs, as the end-user is not affected by the price of uranium.” Adnani said that the current supply of uranium is not enough to meet global demand. After the Fukushima crisis, global demand fell from 185 million pounds to 175 million, while supply remained steady at approximately 130 million.
Uranium has been highlighted in discussions about the nuclear crisis in Japan because it is used to fuel nuclear power plants. Mr. Adnani said that before the earthquake and tsunami damaged the Fukushima Daiichi nuclear complex, people expected the price of uranium to reach around $80/lb by the end of the year. Spot uranium traded at around $70/lb just prior to the nuclear crisis; after Fukushima, uranium prices slumped to $56/lb as investors nervously weighed the potential for a global reconsideration concerning nuclear power.
Some are cautious to say that uranium prices will rise because 17 nuclear plants worldwide have closed post-Fukushima. However, Adnani believes that uranium demand will not be affected, mainly because of the fact that, globally, construction of 62 nuclear reactors is underway, only 3% of which are from G-7 countries. Adnani believes this to be significant, stating, “The fundamental difference between reactors from the G-7 and those from growing economies is that the reactors in growing economies are state-run entities that have very little input from the public.”
He theorized that those governments are more likely to advance their nuclear power capabilities. He used the example of China, where access to capital is easier for state-run projects than for private-run projects. Private-run projects can be swayed by negative public opinion and are often subject to lobbying from shareholders.
The nuclear disaster in Japan has been compared to the infamous Chernobyl disaster in the Soviet Union, but Adnani notes that Chernobyl was more severe. As events in Japan continue to unfold, Adnani believes that “nuclear power is likely to continue to be at the forefront of the world’s energy mix, as the burning of fossil fuels continues to damage the environment and people become more aware of this.”
According to Adnani, UEC was the only company in the world to commission a uranium project last year. At full capacity, the company can process 3 million pounds of uranium a year, very close to the United States’ existing annual domestic output of 3.5 million pounds. In the quarter ending Jan. 31, production of uranium concentrate reached approximately 21,000 pounds. Production is expected to increase every quarter to reach 1 million pounds at the end of July 2012. As UEC’s CEO, Adnani feels that his company is in position to capitalize on the projected resurgence of spot uranium prices.
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