| The The Daily Reckoning PRESENTS: Most
people are in the dark when it comes to nuclear energy,
and all this talk of uranium enrichment programs leaves
people scratching their heads. Well, never fear, Kevin
Kerr will do his best to explain the uranium markets...
RADIOACTIVE PROFITS
The Uranium market is one that is like
a wild roller coaster, and many of the equities associated
with it can make investors queasy from the ride. These
equities are no different from many mining stocks;
they have to be looked at very closely. Uranium trading
was starting to become more stable, or so it seemed.
Then, just as fast as it calmed down - bam! - it went
right back up. In two the uranium price surged $5
to $29 in just two weeks last year.
After the market woke up and new buying
came in, the ultra-precious metal's price climbed
another $4, which set the highest uranium price since
the early 1980s. The new speculation was triggered
by growing expectations that China,
India
and Russia
were planning to build new reactors and more reactors
would cause a run on the limited supply of uranium.
This speculation may well be right, if the International
Atomic Energy Agency (IAEA) stats are even close to
true.
According to a report by the IAEA, 130
new nuclear power plants may be built in the next
15 years. Who are the big players? The usual suspects,
of course: China,
India,
Europe, Russia,
etc. Nuclear power provides about 16% of the planet's
total annual electricity generation and 34% of the
European Union's needs. Trust me, they need it - a
lot. When my wife Katrin and I were in Estonia
recently, it was frigid cold. Likewise, people are
freezing to death in Moscow,
right now. Nuclear power is a key component to economic
survival in both Eastern Europe
and the European Union.
I couldn't believe some of the stats
for other countries that I found in a great nuclear
energy report called Uraniumletter International:
- China:
Announced that it plans to build up to 40 nuclear
reactors within the next 15 years. Some experts feel
this will increase the amount of electricity generated
by nuclear power from 2.4% to 4%.
- India:
Also getting aggressive and wants to increase mining
of uranium ore at four mines, including the existing
Jaduguda mine in Jharkhand. The country recently signed
a nuclear energy agreement with the United
States and could
generate 40,000 megawatts of nuclear power in the
next 10 years, compared with current production of
3,120 megawatts.
- France:
Receives 78% of its electricity from nuclear power.
- Belgium:
Gets almost 56% of its power from nuclear plants.
- Sweden:
Close to 50% of Sweden's
power is nuclear.
- Switzerland,
Japan
and the United
States: Nuclear power
provides 40%, 25% and 20%, respectively.
- Korea:
Currently uses about 40%, operating on 19 nuclear
reactors, and is expected to increase its dependence
on nuclear power up to 60% in three decades.
- Asia:
Nuclear energy is becoming more and more vital to
the growing economies. Without it, Asia's
bazillion factories would come to a grinding halt.
I'm not a historical scholar by any
stretch, but I am a big history buff and the he history
of atomic energy fascinates me. In the 1940s, the
U.S.
government began buying large amounts of uranium in
the effort to produce the world's first atomic bomb.
I mean, a country didn't simply go down
to Wal-Mart in those days and buy some. So, it was
a major undertaking. Don't laugh, maybe someday we
will all have little nuclear reactors in our backyards,
and instead of going to get some more wood for the
fireplace, you’ll have to run to Wal-Mart to
get a bag of uranium.
Nuclear power plants, as we know them,
fired up in 1959. That was when the first privately
funded nuclear energy plant came on-line, in Illinois.
Fast-forward, and by the 1970s that number had exploded
(pardon the pun) to 250 nuclear reactors that were
planned across the United States - but the dream train
of cheap, easy energy derailed a bit.
The disaster in Pennsylvania
changed all that. I was just a kid, but I remember
that accident. Three Mile Island
was a nightmare. My wife Katrin was just a kid when
Chernobyl
happened. She lived in nearby Estonia.
They had to stay inside for days, she told me.
Anyway, the Three
Mile Island nuclear power plant accident
came close to Armageddon in 1979. Remember that movie?
The China Syndrome? In the movie, Jack Lemmon works
in a nuclear power plant that is going to have a meltdown.
This movie is the kind of hysteria that made the public
fear nuclear energy, and basically put the brakes
on new construction. People didn't want it near their
homes, and I can't say I blame them.
Public ignorance and fear of nuclear
power changed the course of nuclear energy, as we’ve
known, it for a very long time. Starting in the 1980s,
utilities were canceling plants hand over fist. This
resulted in the almost complete collapse of the uranium
market.
And then, to beat down the market even
further, uranium got hit square in the jaw. This second
blow came when the Soviet Union
fell apart in 1991. Enriched uranium that was removed
from Russian bombs was blended down to reactor-grade
fuel and put on the market. But, it gets worse.
The third punch came when the Clinton
administration dumped 55 million pounds of "yellowcake"
(uranium in the form of a yellowish powder) on the
market, via a government-owned uranium enrichment
program. This was what really caused the freefall
for uranium prices - until now.
American uranium production peaked in
1980 at 43.7 million pounds, according to the U.S.
Energy Information Administration. That was the proverbial
nail in the coffin for the exploration of uranium.
New research and development ground to a halt, as
mines could no longer afford to operate, and exploration
was basically a waste of time, energy and money. According
to Uraniumletter International, Wyoming
once had eight uranium operations, which produced
12 million pounds per year. Today, things are different
- a lot different. Wyoming
now has none. Ouch!
I could go through each state and many
countries around the world and cite examples just
like that from reports I have read. It seems clear
that because of these widespread shutdowns, the once-overflowing
uranium supply dwindled in just five to 10 years.
Things didn't seem so bad during the
1990s; the lack of new supply from functioning mines
has been supported by other sources. There were excess
inventories, for example, and there was also the dismantling
and recycling of nuclear weapons, especially from
Russia.
Also, reprocessed reactor fuel was added to the mix.
But many of those quick fixes are no
longer available.
The president's State of the Union address
was a rallying cry to uranium producers to get moving...finally,
reality is setting in. The dwindling supply of oil
and spiraling high prices of fossil fuels are driving
interest in nuclear energy as the possible power source
that will be used to meet current and future global
demand.
Three Mile Island and Chernobyl,
unless you lived there, of course, are distant memories
to most Europeans and Americans. On their minds are
the prices at the pumps and their home heating bills.
Bottom line: New supplies of uranium
will come at a much higher cost, which in turn, will
continue to put upward pressure on the future price
of uranium.
Regards,
Kevin Kerr
for The Daily Reckoning
P.S. My co-editor at Outstanding
Investments, Justice Litle, is looking at many of
these uranium companies. After all, there's no use
in building a reactor if you don't have the fuel to
make it work.
Justice is in charge of the
Outstanding Investments portfolio, and he is doing
a fantastic job. He has already recommended great
uranium stocks that he’s had his eagle eye on,
and I think there are more to come. For a sneak peek
at these stocks, see our new special report:
The Four Horsemen of
the Petrocalypse
http://www.agora-inc.com/reports/OST/EOSTG113
*****
Editor's Note: With 15 years of experience,
Kevin Kerr is a true veteran of the commodities markets.
A licensed commodities trader since 1989, he's worked
the trading pits in Chicago
and New York with
legends like Paul Tudor Jones, and he's even traded
commodity derivatives in London.
Over Kevin Kerr's career he's dealt with everything
from cotton to currencies to oil and natural gas.
If you take a look at Kevin's track record
with his commodities trading service, Resource Trader
Alert, you'll see for yourself that he is no stranger
to the natural resource markets:
Get Rich Trading Real Resources
http://www.agora-inc.com/reports/RTA/ERTAG144
Kevin Kerr is a regular contributor to
news outlets like CNN, FOX News, CBS Evening News,
Nightly Business Report and many others. Kevin is
heard weekly on radio stations throughout the country
and he is also weekly columnist with Dow Jones MarketWatch,
where he's been quoted almost daily since 1999.
As editor of Resource Trader Alert, he
uses his extensive knowledge and connections to uncover
blockbuster natural resource investments - everything
in the world of commodities using options on futures
and occasionally resource equities, too.
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