Are We Headed Towards A Uranium Shortage?

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Uranium Shortage

With the price of uranium near a 13-year low and the nuclear power industry building an unprecedented number of new reactors, the industry might be faced with a supply problem in the near future, says the 2017 Red Book, produced by the Organization for Economic Cooperation and Development’s Nuclear Energy Agency with assistance from the U.N.’s International Atomic Energy Agency.

If that’s a mouthful, consider the Red Books official title: Uranium 2016 Resources, Production and Demand. Pretty dry stuff, but not for executives at mining companies stuck deciding on how to play the market.

Down at the local uranium mine, the executive must ponder questions in which the answer is ten years away. The price of uranium now is one thing. But it takes ten years or more to develop a uranium claim into a productive mine, and that requires committing workforce and money to the job. Meanwhile, many factors come into play.

By example, another nuclear power plant could be hit with a disastrous event, such as the 1986 explosion at Chernobyl in Ukraine or the 2011 triple meltdown at the Fukushima Daiichi nuclear generating station in northeastern Japan. Both of those events derailed the industry with the Fukushima disaster forcing the delay of new projects and causing countries like Germany, Japan, France, and Sweden to trim their reliance on nuclear power drastically. Three of those countries – Germany, France, and Japan – have been significant buyers of uranium fuel in the past.

The boom in the industry, propelled by pollution concerns in China, India and elsewhere, including a near-global concern for climate change – would predictably drive the price of uranium higher. But the cost of uranium has been plummeting from a peak of $140/pound in 2007 to a recent skid under $20/pound. So, just when reactors 60 reactors are under construction worldwide, according to the Nuclear Energy Institute, mining companies are cutting back on production.

It takes five to 10 years – sometimes more – to construct a nuclear power plant, which means mining companies should be thinking ahead and going full bore – no pun intended – right about now.

Kazakhstan, however, which controls 40 percent of the market for uranium, announced in December that it would cut production by 10 percent in 2017 due to an oversupplied market. Canada’s Cameco Corporation of Saskatoon, Saskatchewan, said it would slash its exploration and capital projects budgets by 50 percent while trimming production at two mines and keeping production at full tilt at the Cigar Lake Mine, where a high-grade of uranium is unearthed.

Will the price go up? “It’s a question of when, not if,” Cameco President and Chief Executive Officer Tim Gitzel told Power magazine. While nuclear power industry appears to have growing support, is this just the eye in the middle of the hurricane? Another severe accident can derail progress, and the industry is up against a new competitor
that didn’t exist ten years ago: Renewable power. Of course, renewable energy was always there, but until ten years ago, not many people noticed.

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