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How to Invest in Uranium in 2013

It's looking more likely that 2013 is going to be a profitable year for those who know how to invest in uranium.

That will be a nice turnaround from the past two years…

For the past couple years, the nuclear accident at Fukushima in Japan seems to have put the industry on ice as far as investors are concerned.

There has been little interest in most aspects of the nuclear industry, including uranium. 

The price of uranium (U3O8) most recently hit a peak at $72 a pound in January 2011. It has been on a fairly steady decline since the Fukushima earthquake and is currently selling at a price of $40.00 a pound.

But the lights have not gone out for good…

The emerging countries, hungry for electricity to power their economies, are proceeding with plans to build a good number of nuclear reactors. Countries including China, India, Russia and Abu Dhabi are all forging ahead with construction of nuclear plants. In China, construction of twenty-eight nuclear reactors is already underway with 49 planned.

Even in Europe, where high-profile Germany has stepped away from nuclear power, countries such as Turkey, Finland, Czech Republic and the United Kingdom are likely to go ahead with construction of new nuclear power plants. A few will also be built in the United States.

Fiona Reilly, partner and head of nuclear services at Norton Rose, told the Financial Times, "Nuclear projects take time to develop, but activity is building. Fukushima has not had the effect people had initially expected."

This is good news for the industry – and for those who know how to invest in uranium.

Uranium Supply Shortages

Also good news for uranium is the situation on the supply side.

Money Morning Global Resources Specialist Peter Krauth points out that total consumption of uranium in 2011 was 176.7 million pounds. But last year, only 135 million pounds of uranium was mined. That's a deficit of about 41 million pounds.

It's a deficit likely to grow even larger in the years ahead.

The largest uranium producer, Kazakhstan, is delaying expansion of its mines. 

Among the uranium mining firms, the larger companies are not expanding production because of low prices. And many of the smaller uranium firms cannot get funding and are folding.  

For many years, supply deficits in the market were covered by the Megatons to Megawatts program. This is the program that converts uranium in Russian nuclear warheads to lower-grade uranium for use in nuclear reactors.

This program, however, will end in 2013 and the Russians are very unlikely to renew the agreement. Krauth believes that with this source of supply gone, the uranium market will face a deficit of 50-65 million pounds annually.

That points to higher prices.

And higher prices will lead to profits for investors willing to invest into this unloved sector. Here's how to do that.

Join the conversation. Click here to jump to comments…

  1. philio maffia | June 12, 2013

    Yes there's going to be a shortfall when Russia pulls out of the recycled metal scheme,but….we are looking at 5 to 10 years before all these new reactors come on line,if….only if……… the finance is available to build them………a warning….we are at the point,in terms of technolgy ( only slighly assisted by chinese solar panel dumping) where anyone of modest means and modest capital can be energy independant,due largly to overpriced monopoly energy companies.the reactors will be curtailed,not by bunnyhugging eco freaks…………but by massive hikes in energy prices……….and remember…….the nuclear industry is leveraged more than the banks………and never ever has issued transparent pricing of stock/ shares……nuclear is old school tech…it remains to be seen wether this method of electricity generation has a long term future,still complety unresolved on the issue of nuclear waste,in a world of ARM risc processors and low power electronics……sell microsoft and intel,dinosaurs are too hubristic to know when they are dead ducks,like nuclear .

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