Uranium a ‘bread and milk’ commodity: Haywood Securities

Rising energy prices and environmental concerns over hydrocarbon-based energy production in the form of coal, oil and gas are laying the groundwork for a “nuclear renaissance,” Haywood Securities writes in it most recent report on the uranium sector.

In its bullish new study, Haywood forecasts that the spot price of uranium will recover in the second half of this year, moving from US$57 per lb. at presstime to as high as US$80 per lb. later this year and US$100 per lb. next year.

Haywood analyst Geordie Mark predicts uranium prices will remain at US$100 per lb. in 2010 before easing to US$95 per lb. in 2011 and 2012.

That’s because demand currently far exceeds primary production of the commodity. Last year, uranium production totalled 107.1 million lbs. while demand reached 167 million lbs.

This year, Haywood believes primary production will grow 6% to 113.5 million lbs., but primary uranium production will continue to fall short of future reactor demand, Haywood states.

There are 439 reactors in operation around the world today, with 36 under construction, 93 planned and 218 proposed.

And U. S. Republican presidential candidate John McCain is calling for 45 new nuclear reactors by 2030 to lessen his country’s dependence on foreign oil.

The supply deficit on the primary production side “has led to a protracted period where this deficit is drawn from secondary stockpiles,” the report notes. But access to secondary stockpiles will decline in the future, “as it is withdrawn to meet domestic demand obligations.”

Typically, secondary supplies are derived from a number of sources such as natural uranium, depleted uranium and enriched uranium and plutonium, the Haywood report explains. The largest amount of secondary uranium comes from stockpiles of material that have been processed already, for example: highly enriched uranium, highly enriched plutonium, depleted uranium tails and spent fuel.

The U. S. currently has 32 reactors either planned or proposed. By 2020, China aims to increase from 8.5 gigawatts electrical (GWe) to 40- 60 GWe. And Russia says it wants to build two nuclear reactors every year for the next 15 years. Over the next 12 years, India wants to expand capacity to 20 GWe and South Africa to more than 25 GWe.

The U. S. — with its existing infrastructure and regulated permitting regime — will be the biggest source of new uranium companies in the next three years, Haywood predicts, particularly the states of Wyoming, Texas, Colorado and Utah.

Nuclear energy capacity in the U. S. grew more than 20% from 1973 and 1979, and by 8% between 1979 and 1990.

“Such rates of growth are likely to be seen in multiple countries over the next decade or so, especially in China, India and Russia, and are needed to facilitate economic growth in energy-stretched nations such as South Africa,” the report notes.

Demand for electricity is expected to grow by an average of 3% a year between now and 2030, Mark notes, and demand will be the greatest in emerging economies such as India, China and Russia.