In mid-2016, Megan Dailey reported that while there is no telling exactly when oil will be bouncing back for real, she can see pretty clearly how the uranium price will be taking off within the next year or two. It is important to note that uranium does not trade on the open market like oil does. You do not invest directly in the commodity, but rather in the companies that work with it. That said, uranium does cater to the whims of supply and demand. Over the past 10 years, uranium prices have been beaten to a pulp. Before 2007, investment into energy technologies, nuclear included, was rising steadily. Uranium prices peaked at $136 per pound, then plunged with everything else when the financial crisis hit.
The next peak was in 2011, right around the time of the Fukushima Daiichi nuclear disaster. The world nuclear capacity has been mostly flat ever since (FALSE NOTE). Nuclear capacity is increasing, but demand for uranium has plateaued, and the price has continued to slip into a recent 11-year low. The problem is that the uranium market looks a bit like the oil market right now. Flat demand and more supply than strictly needed. According to the World Nuclear Association (WNA), uranium production has increased by nearly 50% since 2007, and in 2015, it managed to cover 90% of world demand. But a coming increase in nuclear capacity in Asia, China especially, is going to boost demand within the next two years.
Analysts are estimating a price increase by the end of this year from $25 per pound to $33, then on to nearly $40 next year. Some are even expecting prices to reach $65 as more nuclear capacity is added. Prices would be even higher if all 20 Japanese nuclear reactors waiting in the wings are approved and launched in the next few years, as some analysts expect them to be. The price-busting squeeze will come when uranium companies that have not invested in new infrastructure for the last 10 years find out they need more production capacity to keep up with the new demand.
Original working URL: https://www.energyandcapital.com/articles/the-real-rally-in-uranium/76710
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