An extremely important thought which has been bouncing around my head was; “with investing, is it better to be proactive, rather than reactive?” In my market research, there was one area which stood out to me as an opportunity in which I could be proactive and make the most of predicted future gains. That area is uranium.
The situation of the USD to uranium price has been well documented over the years with the last major event being the disaster in Fukushima, Japan 2011, which sent the price of the resource through the floor. The uranium price has stabilised recently and, relative to Australian dollars, has actually increased in value.
As far as supply and demand are concerned, there are currently 438 nuclear reactors which contribute 11% of the world’s electricity requirements. Currently, there are a further 65 nuclear reactors under construction worldwide (22 in China), with another 165 reactors planned, and another 324 on top of that currently being proposed. The 65 nuclear reactors under construction are set to add an extra 900M pounds of uranium a year to global requirements by 2020 and the spot price of uranium is expected to double in that time. It is important to note that for obvious security reasons, uranium is not a resource that can be publicly traded like gold or silver, making these new reactors essential to demand. A large reason for the renewed interest of uranium is that it’s being viewed as a way for countries such as China and India, who have pollution problems, to cut emissions while still producing enough electricity to power entire cities.
Obviously this future demand for uranium looks great, but on the supply side it gets even more interesting. Currently, the spot price of uranium (around USD $25 per pound) is extremely low due to the Fukushima disaster and this makes the commodity too cheap to make a profit from, meaning that the supply side is restricted. Uranium producing companies will be looking for long term contracts which can allow them to take advantage of the expected increase in the price of uranium. Australia is the 3rd largest producer of uranium in the world and has multiple uranium producing companies on the ASX, so there are vehicles for investors to find and take advantage of.
Happy investing!
James Walker