Secure Energy for Prosperity

Desjardins: Uranium Prices Should Stabilize at $60

The uranium bull market and nuclear renaissance are currently being massively overstated, and the dangers of nuclear power downplayed. From a financial standpoint, there is a case for nuclear power, but it is a long-term case.

This article is the antithesis to the near-term nuclear & uranium bulls, continually arguing that there is a "uranium shortage" and expecting a "uranium buying panic".

I pointed out months ago in a similar commentary that even with delays in uranium mining capacity coming online, the expected increase in output is a significant proportion of current production. When pressed on the issue of a shortage, the uranium bulls will fall back with the caveat "mining" shortage -- and this is technically true given that a large portion of US uranium supply is met with Russian HEU. But there is no uranium shortage today.

Nor is there likely to be in the next 5 years. 5 years is the relevant timeframe for two reasons:

1. The Russian HEU agreement officially expires in 2013.
2. Any new plants being constructed from here on out in Asia would not come online before 5 years. (Although the Japanese have done some faster than that, its unrealistic to expect this in the near term.)

As with all energy planning, there is a need to meet near term demand, but an imperative to build supply that can only deliver over a much longer term.

Contrary to the nuclear bull arguments, Gen III and IV reactors are not "proven" to be failsafe, or ever safer. A lot of technological development is in process.

The only near term catalysts would be events extraneous to the core nuclear business:

1. Extreme resource nationalism by the Russians, withholding promised HEU supply to the US.
2. Strategic buying by Chinese and other SWFs to lock up uranium supply.
3. A massive oil shock.

We cannot discount the possibility of any of these. But in any event, the likely outcome of any of these would be more reliance on natural gas (and even coal), while we continue to build out solar and nuclear infrastructure.