Nuclear Comeback
Just 60 percent of the uranium consumed in the world's nuclear reactors is mined each year. Without supplies from stockpiles and recycled from Russian warheads, the energy industry wouldn't have enough uranium to keep all of its plants running.
Demand for nuclear power is increasing in China and India because of rising prices for oil, gas and coal. Finland is building a new reactor, and utilities in France and the U.S. are considering additions. Concern that the burning of fossil fuels contributes to global warming is accelerating the push.
Bob Mitchell, the manager of a hedge fund that invests in wholesale uranium, is so bullish that he turned down offers from mining companies to buy his entire inventory. He wouldn't identify the companies or give details on his holdings.
``I remain a buyer of uranium,'' said Mitchell, 52, of Adit Capital Management LP in Portland, Oregon. Mitchell said he began buying uranium in November 2004 at $20 a pound amid reports that some power companies were moving to replenish their inventories. Uranium ended last week at $39.25 a pound, according to Metal Bulletin.
Speculators ``have taken out whatever slack exists in the market,'' said James Cornell, president of RWE Nukem Inc., a trader of uranium and unit of RWE AG of Essen, Germany's second- largest utility. Investors are ``getting to available supplies of uranium before the utilities.''
`A Rebirth'
After three decades of stagnation, the nuclear industry may receive more than $200 billion of investment by 2030, according to the International Energy Agency in Paris. As well as the 24 reactors now being built, another 41, with a capacity of almost 43,000 megawatts, have been ordered or are planned, according to the World Nuclear Association in London.
About a ton of uranium fuel is used every two weeks to supply a 1,000-megawatt power station, according to Australia's Uranium Information Center. About nine tons of uranium oxide would be needed to make the fuel.
``The nuclear industry is currently undergoing a rebirth,'' said Paul Gray, an analyst at Goldman Sachs in London. ``The uranium market will remain tight for at least the next three years.''
Gray was among the Goldman Sachs analysts who at the start of last year correctly predicted uranium prices would extend their advance.
Mining Turnaround
Uranium's surge has revived interest in mining, threatening to end the rally.
London-based Rio Tinto, the world's third-largest mining company, scrapped plans to close a site in northern Namibia and approved a $112 million project to extend the life of its Rossing mine by seven years. The site had been slated to shut in 2009, ending jobs for more than 1,000 workers.
The mine supplies about 8 percent of the world's uranium and made money in 2005 after two years of losses.
Because of rising prices, ``we are certainly in a better position than this time last year,'' said Managing Director Michael Leech of Rossing Uranium in Swakopmund, Namibia.
Last month, Toronto-based SXR Uranium One Inc. more than doubled a stock offering to $147 million to fund redevelopment of South Africa's largest uranium deposit, shut since 1982. Melbourne-based BHP Billiton, the world's biggest miner, is considering tripling output from its Olympic Dam mine in South Australia.
`Faint of Heart'
Victor Lazarovici, an analyst at BMO Nesbitt Burns Inc. in New York, forecasts that wholesale uranium will peak at an average $38 a pound next year and fall to $32 in 2008 as new mines come on stream and reactors use uranium more efficiently.
``This is not a sector for the faint of heart,'' he said. ``We're projecting the market will go back into surplus in a couple of years.''
New generators may increase uranium consumption by 2.5 percent a year for each of the next five years, straining supplies as stockpiles are drawn down, according to Glyn Lawcock, head of resources research at the Australian equities unit of Zurich-based UBS AG, Europe's biggest bank by assets. Prices may average $40 a pound in 2007, up from $28 last year, the bank said.
``The big problem with uranium is that there's a scarcity of supply,'' said Lawcock, who works from Sydney.
Bloomberg
Demand for nuclear power is increasing in China and India because of rising prices for oil, gas and coal. Finland is building a new reactor, and utilities in France and the U.S. are considering additions. Concern that the burning of fossil fuels contributes to global warming is accelerating the push.
Bob Mitchell, the manager of a hedge fund that invests in wholesale uranium, is so bullish that he turned down offers from mining companies to buy his entire inventory. He wouldn't identify the companies or give details on his holdings.
``I remain a buyer of uranium,'' said Mitchell, 52, of Adit Capital Management LP in Portland, Oregon. Mitchell said he began buying uranium in November 2004 at $20 a pound amid reports that some power companies were moving to replenish their inventories. Uranium ended last week at $39.25 a pound, according to Metal Bulletin.
Speculators ``have taken out whatever slack exists in the market,'' said James Cornell, president of RWE Nukem Inc., a trader of uranium and unit of RWE AG of Essen, Germany's second- largest utility. Investors are ``getting to available supplies of uranium before the utilities.''
`A Rebirth'
After three decades of stagnation, the nuclear industry may receive more than $200 billion of investment by 2030, according to the International Energy Agency in Paris. As well as the 24 reactors now being built, another 41, with a capacity of almost 43,000 megawatts, have been ordered or are planned, according to the World Nuclear Association in London.
About a ton of uranium fuel is used every two weeks to supply a 1,000-megawatt power station, according to Australia's Uranium Information Center. About nine tons of uranium oxide would be needed to make the fuel.
``The nuclear industry is currently undergoing a rebirth,'' said Paul Gray, an analyst at Goldman Sachs in London. ``The uranium market will remain tight for at least the next three years.''
Gray was among the Goldman Sachs analysts who at the start of last year correctly predicted uranium prices would extend their advance.
Mining Turnaround
Uranium's surge has revived interest in mining, threatening to end the rally.
London-based Rio Tinto, the world's third-largest mining company, scrapped plans to close a site in northern Namibia and approved a $112 million project to extend the life of its Rossing mine by seven years. The site had been slated to shut in 2009, ending jobs for more than 1,000 workers.
The mine supplies about 8 percent of the world's uranium and made money in 2005 after two years of losses.
Because of rising prices, ``we are certainly in a better position than this time last year,'' said Managing Director Michael Leech of Rossing Uranium in Swakopmund, Namibia.
Last month, Toronto-based SXR Uranium One Inc. more than doubled a stock offering to $147 million to fund redevelopment of South Africa's largest uranium deposit, shut since 1982. Melbourne-based BHP Billiton, the world's biggest miner, is considering tripling output from its Olympic Dam mine in South Australia.
`Faint of Heart'
Victor Lazarovici, an analyst at BMO Nesbitt Burns Inc. in New York, forecasts that wholesale uranium will peak at an average $38 a pound next year and fall to $32 in 2008 as new mines come on stream and reactors use uranium more efficiently.
``This is not a sector for the faint of heart,'' he said. ``We're projecting the market will go back into surplus in a couple of years.''
New generators may increase uranium consumption by 2.5 percent a year for each of the next five years, straining supplies as stockpiles are drawn down, according to Glyn Lawcock, head of resources research at the Australian equities unit of Zurich-based UBS AG, Europe's biggest bank by assets. Prices may average $40 a pound in 2007, up from $28 last year, the bank said.
``The big problem with uranium is that there's a scarcity of supply,'' said Lawcock, who works from Sydney.
Bloomberg
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