China's Growing Appetite For Uranium

Published on Thursday December 09 2010

Is there any metal or, indeed, commodity in which China is not making the running — where China’s rising demand is not creating a wholly new dynamic in the global supply market? After some thought, one might have ventured uranium, that metal long dependent on the established generating markets of the old order – Russia, France, Japan, the US and, more recently, South Korea. But apparently even the uranium market is rapidly changing. According to an FT article, China is aiming to generate 5 percent of its electricity from nuclear power by 2020, in the process quadrupling its uranium consumption to 50 million-60 million pounds a year, according to UxC forecasts.

That compares with annual global demand of about 190 million pounds today and has seen the Chinese embark on an ambitious and aggressive buying spree at prices some 30 percent over current spot and twice spot prices of a year ago, tying up long-term supply offtake agreements and joint ventures. With minimal domestic production, just 2 million pounds this year, China’s imports have been equivalent to 20-25 percent of global uranium consumption and yet reactor building is still in its early stages with 23 reactors under construction but 120 planned, according to another article.

Ralph Profiti, analyst at Credit Suisse in Toronto, believes China is getting ahead of other consumers and, as with copper and non-ferrous metals, is building up a strategic stockpile before the Americans, Japan or Korea need to do their restocking.

If that is so, the US is particularly vulnerable. The country has over 100 nuclear reactors generating nearly 20 percent of the country’s electrical energy, but the US imports over 80 percent of its uranium supply. If uranium supply goes the way of other commodities, the US could increasingly be a hostage to the fortunes of an increasingly limited supply base as spot prices are driven higher and sources are tied up under long-term supply agreements. Which may explain why US authorities were so willing to pass approval for a Russian state-owned mining company, ARMZ, part of Rosatom power group, to control up to half of US uranium output by the middle of the decade.  The FT this week reported ARMZ has been approved by the Committee on Foreign Investment in the US, the government agency that vets foreign takeovers of US companies for possible national security implications. In November, the US Nuclear Regulatory Commission, which controls the ownership and operation of nuclear power facilities, also gave their go-ahead for ARMZ to take a 51 percent stake in Uranium One. The firm owns resources in Wyoming and plans under ARMZ’s control to ramp up production to between 2 and 4 million pounds by 2015 against a total US production today of about 4 million pounds.

Interestingly, the changing supply landscape has not escaped the investment community. BlackRock, said to be one of the largest investors in commodities, is said to be bullish on uranium, and an exchange-traded fund launched by Global X Funds has increased its holdings to $70 million in just three weeks since launch.

Click Image To Access Uranium Stocks Australia

Visit my other site Australian Uranium Investing

Uranium Set To Out Perform Gold

Published on Monday Nov 22 2010

If global media reports are to be believed, uranium is all set to beat gold this year as far as price rise is concerned.

According to a report appeared in the new York Times, when Global X Funds of New York announced plans for two exchange-traded funds — one for gold stocks, the other, uranium, the one which got the maximum attraction was the uranium fund not the much-hyped gold.

Global X’s Uranium ETF — with holdings in companies like the Cameco Corporation, Paladin Energy and Uranium One — was a hit as soon as it went on sale on November 9, with early trading volume outpacing Global X’s gold ETF by five to one.

Again uranium industry insiders were caught off guard by a deep run-up in spot market prices, which are now about $58 a pound, up sharply from the low $40s in the summer.

It appears that the character of the spot market has changed markedly over the past few months from one that was heavily oversupplied with weak demand to one that has high levels of demand with very little supply, said a report in New York Times.

The price surge hints at a confluence of significant changes — a perfect storm now sweeping through the global nuclear power industry, especially in Asia. With China recently moving to accelerate sharply its nuclear building program by 2020 — the showpiece is the 3,300-megawatt Taishan plant in Guangdong Province, due to come online in 2013 — the country’s nuclear utilities are now trying to secure fuel supplies for years to come.

On November 1, China’s long-term planning agency announced that by 2020 it intended to raise nuclear power’s share of the country’s total energy production to 112 gigawatts, or 7 percent, up from the previous target of 70 gigawatts. That translates into an additional 82 million pounds of uranium.

Just as Global X’s uranium ETF went on sale, the French nuclear giant Areva signed a 10-year, $3.5 billion deal to supply 20,000 tons of uranium fuel to the China Guangdong Nuclear Power Corporation. Areva is a minority partner in the Taishan plant, described as the largest civil nuclear project ever. Cameco signed a similar deal earlier this year.

Russia, South Korea and Pakistan are also developing reactors and preparing to stockpile long-term inventories. The activity isn’t just domestic: China is reported to be helping Pakistan build five reactors, while South Korea recently won a large reactor project in the United Arab Emirates.

These moves contrast sharply with the situation in North America, where many nuclear projects are stalled because of economic uncertainty and a lack of government financing. Still, many analysts anticipate the Asian nuclear program will drive uranium prices to $70 to $80 a pound in the next several years — a level that will set off a new wave of exploration and mine development.

Lacking domestic uranium sources, China and companies like Paladin are also beginning to develop uranium mines in African countries including Namibia and Niger.

These latest developments are welcome news for uranium producers, some of which struggled in recent years after a mid-2000s boom was followed by a price collapse.

Over the last decade, Kazakhstan rapidly became the world’s largest uranium producer, overtaking Canada with vast increases in production.

Further complicating the picture was the fact that many nuclear utilities were acquiring fuel on the so-called secondary market — reprocessed uranium from decommissioned warheads, uranium tailings and spent reactor fuel.

Indeed, as 2010 draws to a tumultuous close, many uranium industry insiders are thinking ahead to the state of the market circa 2014 and beyond.

Visit my other site Australian Uranium Investing