How great is the demand for uranium likely to get? Saskatoon-based Cameco, the world’s largest uranium miner, estimates that even without the potential for added demand due to rising oil and natural gas prices, global uranium demand should average 194 million pounds per year from 2003 to 2012, with the United States using 40 million pounds of that amount from 2006 onward.
What about supply? Uranium is more abundant than tin and 10 times more abundant than silver. Yet a chronic supply/demand imbalance has developed in yellowcake, as U3O8 is known. The best evidence of this is that the industry has been living on inventory since 1985.
Supply is running at about 135 million pounds per year, with mines contributing only 79.2 million pounds per year. In Canada and Australia, the big dogs in uranium, few new mines have come on stream, largely as a result of recently poor prices.
Of course, if prices continue to rise, prospectors will redouble their efforts to find new deposits. But it typically takes up to 10 years from discovery to production for a well-sized mine.
The balance of the uranium needed to keep the world’s lights on today comes from aboveground supplies, like weapons conversion, MOX/breeders and utility stockpiles. However, these supplies are not growing, while demand is – rapidly.
Using the 194 million pounds per year demand forecast and subtracting roughly 50 million pounds of supply from above- ground sources results in a 144 million pound per year difference that mine production needs to meet (nearly double current output). That’s not going to happen, except at much higher uranium prices. While longer-term price forecasts are worth little – there are just too many variables – I’ll make a guess. Uranium will trade over $25 within the next 12 months and is quite capable of going to $30, $40 soon, and over $100 by the end of the decade.
Success in speculation requires a willingness to look beyond the hype and hysteria about things like nuclear power. With the exception of a small group of pathetic Luddites, no one is ready to freeze in the dark. To sustain the increases in energy demand dictated by a growing world economy, there is no question that uranium will need to play a key role. Uranium, after decades of being the unwanted stepchild of energy sources, is now likely to offer better percentage returns to speculators than oil, gas or any other energy alternative.
What about supply? Uranium is more abundant than tin and 10 times more abundant than silver. Yet a chronic supply/demand imbalance has developed in yellowcake, as U3O8 is known. The best evidence of this is that the industry has been living on inventory since 1985.
Supply is running at about 135 million pounds per year, with mines contributing only 79.2 million pounds per year. In Canada and Australia, the big dogs in uranium, few new mines have come on stream, largely as a result of recently poor prices.
Of course, if prices continue to rise, prospectors will redouble their efforts to find new deposits. But it typically takes up to 10 years from discovery to production for a well-sized mine.
The balance of the uranium needed to keep the world’s lights on today comes from aboveground supplies, like weapons conversion, MOX/breeders and utility stockpiles. However, these supplies are not growing, while demand is – rapidly.
Using the 194 million pounds per year demand forecast and subtracting roughly 50 million pounds of supply from above- ground sources results in a 144 million pound per year difference that mine production needs to meet (nearly double current output). That’s not going to happen, except at much higher uranium prices. While longer-term price forecasts are worth little – there are just too many variables – I’ll make a guess. Uranium will trade over $25 within the next 12 months and is quite capable of going to $30, $40 soon, and over $100 by the end of the decade.
Success in speculation requires a willingness to look beyond the hype and hysteria about things like nuclear power. With the exception of a small group of pathetic Luddites, no one is ready to freeze in the dark. To sustain the increases in energy demand dictated by a growing world economy, there is no question that uranium will need to play a key role. Uranium, after decades of being the unwanted stepchild of energy sources, is now likely to offer better percentage returns to speculators than oil, gas or any other energy alternative.
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