Uranium Update

I've recently heard through the grape vine that uranium has jumped to $120 /lb. My thoughts on this are like a broken record. Demand continues to outstrip supply and there are no signs of that letting up.

I have some great numbers brought to you by Mike Berry. There are currently 448 nuclear power plants in operation. They consume U3O8 at an annual rate of 188 /lb per year. Current production of U3O8 is approximately 100 million pounds of U3O8 per year.

Berry reports that there are currently as far as future plants go, there are 34 new nuclear power plants for the U.S., 40+ for China, 42 for Russia, and 11 for S. Korea to mention a few. It would take a 41,000 tons of uranium mine production globally to catch up with demand.

I guess what I'm getting at is that I still expect prices push higher. How high do I see them going? Well, as you know, I think this question is ludicrous. It will be very easy to tell when supply catches up with demand in this market. If you forced me to make a guess, I would throw something out there like $200-225 /lb.

I feel that there is an important, but often over looked, item to note. As in most commodities, these prices will be unsustainable. There isn't a shortage of uranium in the earth, there's just a shortage of mines and refineries to extract that uranium. In the long run, I see a price of $40-50 /lb. This is how commodity super cycles work.

One final not before I finish this post. I'm sure you've noticed that I have failed to mention anything about the uranium futures market that opened up today. I feel that this is a nice vehicle for both sides of the market to have a more accurate price than a weekly spot price. I wasn't positive how this would effect uranium stocks. Honestly, I thought we might see an initial sell off in these stocks followed by some good strength. Obviously that's not the case. Denison is trading up approximately 9% today and SXR is up around 4%. I look forward to following this futures market and seeing its effect on the price of U3O8.