According to Fridays Nuclear Market Review (NMR), many market participants were left stunned by the recent record jump in the weekly spot uranium price. The market has increasingly diverged between those who have U3O8 and those without. Utilities with existing supply contracts are heaving a sigh of relief, NMR editor Treva Klingbiel wrote. And those trying to find uranium in todays climate are forced to face the reality of a sellers market, she said.
Is there pity for one market participant, who is now scrambling for very near term delivery of nearly 500 thousand pounds U3O8? Probably not. This buyer must compete with 7 others hoping to secure about 3.2 million pounds of U3O8 equivalent.
NMR reports, Sellers remain reluctant to sell significant quantities today. By waiting longer, sellers expect to get a higher price for the material they hold. After the previous weeks astonishing price jump, the spot uranium market was exceptionally quiet, according to Klingbiel. The spot uranium price indicator remained unchanged at US$113/pound. TradeTech posts changes in the weekly spot uranium price on the consulting services website, at www.uranium.info
Utility Pricing Climate
Utilities remain skeptical about the long-term pricing of uranium. This weekends Barron article, about the crisis nuclear utilities face, quotes Exelon Corps (EXC) Tom Malone and Entergys (ETR) Frank Rives. Both believe uranium pricing should settle down. Malone quoted a long-term uranium price of $40/pound. Utilities accustomed to lower pricing levels and wishing for uraniums return to a more advantageous price level for themselves, may be waiting for more than a few years. In conversations we had with TradeTechs Gene Clark, equilibrium might not take place until 2017.
We provided TradeTechs Uranium Price Forecast through 2008 in Chapter Two of our soon-to-be-released Uranium Outlook publication. Going out further, uranium production should not reach 230 million pounds U3O8 until about 2017. And there are many disturbing developments in numerous areas, which could substantially lower this production forecast. Foremost are the difficulties BHP Billiton (BHP) may have in transforming Olympic Dam into an open pit uranium mine.
Some utilities are again taking the wait-and-see attitude about higher uranium costs. This strategy has backfired over the past year because a number of countries planned to increase or add civilian nuclear power programs. Now the Arab Gulf States want nuclear energy, adding to the number of countries seeking to obtain uranium. Everybodys going for nuclear programs, Jordans King Abdullah II told an Israeli newspaper.
Against the advice of some experts, we included a special section in our publication, Investing in the Great Uranium Bull Market, predicting a rise of civilian nuclear energy in the Middle East. Turkey plans three nuclear reactors, hoping to start construction later this year on the first one. After Russian President Putin visited Saudi Arabia in February, offering nuclear aid, will U.S. utilities now also be forced to compete for Kazakh uranium against the Arab Gulf States? It appears global deals are being arranged on a country-to-country basis, and U.S. utilities are coming up short.
Environmentalists: Nuclear Friend or Foe?
This past week, Jim Marston, the Texas director of climate initiatives for Environmental Defense told the Living on Earth environmental show, We have come to the conclusion that the threat of global warming is so severe and the time for action is so short that we have to look at all low carbon options again including nuclear. His comments were broadcast on more than 300 public radio stations in all fifty states across the U.S. The shows theme was entitled, TXU Turns Nuclear.
Does this mean environmentalists are switching to nuclear energy? No. Some still cling to atavistic attitudes. One environmentalist interviewed compared a switch to nuclear on par with giving up cigarette smoking and taking up crack.
But, environmentalists influenced TXUs business model, eliminating the construction of eight new coal-fired power plants. According to the shows news reporter, Environmental groups opposed to the utility's plan for new coal plants launched a fierce legislative and legal campaign. That drove down the price of the company's stock, and made TXU a tempting takeover target. And taken over it was, but the company also negotiated with environmentalists by offering renewables, energy efficiency incentives and mandatory caps on greenhouse gases.
TXU spokesman Tom Klekner was also interviewed on this radio show. He pointed out that TXUs power reserve margins were below the minimum of acceptable levels. The spokesman insisted five new nuclear plants were needed. After TXU was taken over, the company announced plans to build the two largest nuclear reactors in the U.S.
Across the country, in New Jersey, state environmentalists are arguing about the NRCs plans to grant a twenty-year license extension to Exelon Corps Oyster Creek Salem 1 and 2 plants. They are demanding the state revise its nuclear emphasis on the Corzine Administration Energy Master Plan. The plan calls for obtaining twenty-year extensions on all of the states nuclear power plants. As one alternative, they suggested building more windmills off the Jersey shore by 2020. A wind farm currently operates in often-breezy Atlantic City, where casinos are also located.
Oyster Creek is the countrys nuclear plant still in service, according to the U.S. Energy Information Administration. Nuclear energy generates about one-half of the states electricity. More than 25,000 million kilowatt hours are generated each year through New Jerseys four nuclear reactors. It is likely environmentalists will do little more than argue about nuclear as New Jersey also has plans to use more coal.
The news media climate about nuclear has rapidly changed over the past five years. Hardly a significant news item was a transformer fire about 40 miles north of New York City at Entergys Indian Point 3 reactor. The reactor could be offline for about two weeks, and the NRC plans on tightening their plant inspections. This was the fourth unplanned shutdown since July.
Another step back for Entergy could be a Sunday deadline to pass NRC muster on their emergency siren warning systems. Only 31 of 150 sirens in three counties failed the test, but thats not good enough for the NRC. The regulatory agency demands a 90-percent success rate. While the utility can request another 75-day extension, NRC spokesman Neil Sheehan announced approval would not be automatic.
These evidences confirm what we have suspected for some time. Regulatory agencies, not the environmental movement, have stepped in to prevent a Three-Mile Island repeat. Over the past thirty years, regulation of nuclear power has evolved above the level of Homer Simpson satire. Engineering developments and safeguards are steeped in sufficient layers of protective bureaucracy to avoid another serious nuclear accident. Science has replaced rhetoric when bringing about changes in the nuclear industry.
With this in mind, environmentalists could better serve the citizenry by focusing their attention on coal-fired power plants, which reportedly exude more radioactivity than nuclear plants. Yes, coal beds commonly have uranium in their composition. No nuclear safeguards have yet been applied to burning coal. Perhaps environmentalists should chase this ball of yarn if they are indeed sincere about carbon emissions, global warming and abrupt climate change.
Next month, the number of U.S. nuclear reactors should increase by one to 104. The dormant Unit 1 reactor at Browns Ferry in Alabama will get its final inspection. TVA (TVE) hopes to restart the reactor in May. The nuclear unit has not been operational for more than two decades. The nuclear renaissance is alive and well in the U.S., not just overseas.
Australian and Canadian Uranium Stock Indexes Set Record Highs
Matthew Smith of TheInvestar reports his Australian uranium stock index closed at an all-time high this past week. The Canadian uranium stock index closed a few points below its record high set earlier in the week.
Smith observed AREVAs developments in Australia. In an email, he wrote, With AREVA being so active right now in Australia this tells us:
They think the 'Three Mines Policy' will be overturned at the end of the month.
There is a higher risk for the Athabascan mines than Cameco (CCJ) is letting on. Therefore, AREVA (whose subsidiary is an owner, through joint ventures, of many of the mines there) is diversifying and spreading their risk over many future deposits and mines.
They see increased demand in a large way down the road. AREVA would not be buying if they could not justify this. The larger miners are generally very conservative. American and Australian deposits are where the big boys will go first when buying. Then, they will gradually gravitate to the more speculative plays in Athabasca and elsewhere.
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Julie Icke and James Finch co-authored this article. James Finch contributes to StockInterview.com and other publications. His focus on the uranium mining and nuclear fuel sector resulted in the widely popular Investing in the Great Uranium Bull Market, which is now available on http://www.stockinterview.com and on http://www.amazon.com