China Demand for Uranium, World Growth in Electricity Demand to Drive Uranium Price Higher
Industry expert says all new production already factored in uranium price “We are consuming far more uranium than we are producing worldwide,” explained David Miller, Wyoming legislator and recently appointed president of Strathmore Resources (TSX-V: STM; OTC: STHJF.PK). “All the new production is already factored into the future market for uranium. We’re underwater right now without building one more nuclear power plant.”
Nuclear reactor requirements have far outstripped current mining production (see chart below) for the past two decades. Current worldwide production is more than 80 million pounds, but the demand for uranium, which fuels nuclear reactors, is running an annual deficit of approximately 60 million pounds.
According to a World Nuclear Association report on uranium supply, published this past September:
“…the world’s present measured resources of uranium in the lower cost category (3.5 Mt) and used only in conventional reactors, are enough to last for some 50 years… Further exploration and higher prices will certainly, on the basis of present geological knowledge, yield further resources as present ones are used up… so a significant increase in exploration effort could readily double the known economic resources, and a doubling of price from present levels could be expected to create about a tenfold increase in measured resources, over time.”
Electricity: Uranium’s Supply and Demand Problem
“We’re not going to run out of uranium, but where will the price go to encourage new production?” asked David Miller. “We are around over $33/pound now. Could it double again? It wouldn’t surprise me at all.” Kevin Bambrough, a research analyst for Sprott Asset Management, heartily agreed with Mr. Miller, saying, “We have just started a long term uranium bull market that will end in a ‘uranium mania’ as utilities and countries drive uranium prices to unbelievable highs as they compete to secure supplies.”
That driving force is demand for more electricity. Over the past 25 years, total world energy use expanded by almost 50 percent, with stronger growth in electricity usage. Demand for electricity is increasing far more rapidly than overall energy use. Electricity demand has been projected to grow 2.8 percent annually through 2010, and substantially more between then and 2020. About 2 billion people currently have no electricity access, and with United Nations forecasts of world population growth by 1.5 billion people in 2020, electricity demand will continue to grow.
As an interim solution to the greenhouse gas problem and climate changes (e.g. the worst Atlantic hurricane season since record-keeping began), a growing number of countries are investigating nuclear energy to solve their burden of a soaring electrical demand. Presently, there is as much electricity generated by nuclear power as was provided by all sources worldwide in 1960.
Nuclear power generates more than 16 percent of the world’s electricity, nearly 24 percent of the OECD and 34 percent of the European Union’s electricity needs. In an April 2005 speech to the National Small Business Conference in Washington, President Bush announced, “Nuclear power is now providing about 20 percent of America’s electricity, with no air pollution or greenhouse gas emissions. Nuclear power is one of the safest, cleanest sources of power in the world, and we need more of it here in America.”
Demand for electricity is projected to impact other commodities as well, not just the price of uranium. In the Energy Information Agency’s Annual Energy Outlook 2005, U.S. electricity demand will bring about increases in natural gas consumption. By 2025, the electric power sector will account for 31 percent of total demand for natural gas, as consumption increases from 5.0 trillion cubic feet in 2003 to 9.4 trillion cubic feet in 2025.
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