nuclear power plants
Pity poor uranium -- there is perhaps no more unloved segment of the energy market right now.
Not only is it a commodity, but nuclear power has a stigma attached to it, thanks to the March 2011 Fukushima nuclear mishap in Japan.
Uranium has brought both joy and tears to investors over the past decade. After a 20-year bear market, the price of uranium (U308), bottomed in 2001 at $8 per pound. It then skyrocketed to over $100 a pound, only to fall back again.
Most recently, it peaked at $72 a pound in January 2011. The Fukushima earthquake and tsunami disaster a few months later put a pall over the industry and prices, resulting in the current price of $40.70 a pound.
Yet despite some countries slowing down their plans for nuclear power expansion and the negative mood hanging over the sector, uranium looks to be poised for a rebound in the not-too-distant future.
Why? Well, for one thing, the United Nations' nuclear agency - the International Atomic Energy Agency - said "The Fukushima Daiichi accident is expected to slow or delay the growth of nuclear power, but not reverse it."
The IAEA forecast impressive growth of somewhere between 23% and 100% in nuclear power capacity by 2030.
Why Uranium Prices Are at a Critical Tipping Point
Despite the Fukushima disaster in March 2011, the demand for nuclear power continues to rise.
For uranium investors, that means the commodity is at a critical tipping point towards much higher prices.
Thanks to considerably higher energy costs, even Japan is now shifting its stance on nuclear power. According to Japan Today, newly elected Prime Minister Shinzo Abe now says he is willing to build new nuclear reactors.
That's a dramatic shift from the previous government's pledge to phase out all of the country's 50 working reactors by 2040.
But the most significant impact in nuclear power is likely to come from the developing world-especially China.
China's commitment to nuclear power means they could be adding as many as 100 nuclear reactors over the next two decades. That's a monumental shift considering China currently operates only 15 reactors.
Other nations such as Russia, India, South Korea, and the UAE are contemplating new nuclear power plants as well that would add to the 435 nuclear reactors already providing base-load power worldwide.
In this year alone, 65 nuclear power plants are under construction, another 160 new reactors are currently in the planning stages and 340 more have been proposed.
Given this ongoing shift, the demand for uranium is clearly going to be getting stronger, which presents a problem since there is already a uranium supply deficit.
According to the World Nuclear Association, total consumption of uranium was 176.7 million pounds in 2011 and growing. Meanwhile, last year's total uranium output was 135 million pounds. That's an annual deficit of roughly 40 million pounds.
Of course, you know what happens when supply can't keep pace with demand--- uranium prices will begin to rise.
But that's only part of the story. Thanks to the end of a program called Megatons to Megawatts the supply deficit promises to get even worse.
Toshiba Talks Highlight Nuclear Power Slow Down
Toshiba CEO Norio Sasaki told Dow Jones in an interview today (Thursday) the company is negotiating with three potential buyers, including Chicago Bridge & Iron Company NV (NYSE: CBI), to purchase a 16% stake in the Westinghouse Electric nuclear power unit.
Toshiba said earlier this year it would consider offers as long as it retained majority control over Westinghouse.
Toshiba paid $4.16 billion in 2006 for a 77% stake in Westinghouse. In 2007, Toshiba sold a 10% stake in Westinghouse to Kazatomprom of Kazakhstan, leaving the company with 67% of Westinghouse.
But Toshiba's stake will jump to 87% in January when a sale from The Shaw Group Inc. (NYSE: SHAW) becomes final. Shaw in September 2011 exercised an option to sell its stock after it agreed to be taken over by rival Chicago Bridge & Iron.
An 87% stake would give Toshiba too much exposure to a nuclear industry rattled by the March 2011 accident at Japan's Fukushima nuclear power plant.
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Japan Nuclear Crisis: New Power Plant Construction Renaissance in Peril
Concerns revived by the nuclear crisis in Japan could well reverse a renaissance in new power plant construction in many countries, while design upgrades to prevent similar reactor failures will make those that are built more expensive.
The 9.0 earthquake and resulting tsunami that struck northeastern Japan on Friday have caused a series of catastrophic failures in several nuclear reactors at the Fukushima Daiichi plant. Attempts to cool overheating fuel rods have led to four explosions, giving rise to fear over how much nuclear radiation may have escaped.
As the crisis has deepened, so has its potential to inflict lasting damage on the nuclear industry.