When it comes to investing in the metals sector, investors have many options choose from. One of those options is uranium.
Before investing in the energy metal, it’s worth taking a look at what makes uranium an important commodity in our day-to-day lives. Here’s a brief overview of what uranium is, what it’s used for and why so many investors are interested in the metal.
What is uranium?
Uranium is a fairly common metal, and occurs in most rocks in low concentrations of 2 to 4 parts per million. It even occurs in water, making it more common than gold. Uranium was discovered in 1789 by Martin Klaproth, a German chemist, in a mineral called pitchblende. It was named after the planet Uranus, which had been discovered several years prior.
Uranium, when refined, is a silvery white metal that is weakly reactive. It does, however, react with most non-metal elements and their compounds, except noble gases. The metal’s reactive properties increase with temperature.
Naturally occurring uranium is found in two different isotopes: uranium-238 (U-238), which accounts for 99.3 percent of uranium occurrences, and uranium-235 (U-235), which makes up the remaining 0.7 percent of uranium instances.
Of those two isotopes, U-235 is the most important. U-235 is the uranium isotope most commonly used in nuclear fuel. That is because is U-235 is fissile, meaning that under certain conditions the isotope can be split, creating a significant amount of energy.
Unlike U-235, U-238 is fertile, but not fissile. That means it can capture one of the neutrons flying around in the core of a reactor, creating plutonium-239. Plutonium-239 behaves very much like U-238 insofar that it is fissile and gives off significant amounts of energy.
The most significant use of uranium today is in nuclear power generation. The first commercial nuclear power stations started operating in the 1950s. Today there are over 400 commercial nuclear power reactors in operation, providing more than 10 percent of the world’s electricity without carbon emissions.
Uranium is also used by the military sector, particularly in high-density penetrators. This ammunition uses depleted uranium alloyed with 1 or 2 percent of other metals, like titanium and molybdenum. Depleted uranium is also used to harden armor on military vehicles.
Probably the most prevalent use of uranium in military applications is weaponry, specifically nuclear bombs. That was one of the first uses of uranium before electricity and radioisotopes. However, since the 1990s, most of military uranium has been repurposed for electricity-generating purposes.
Radioactive isotopes are also an important use of uranium. With a foothold in the medical, industrial and agricultural sectors, radioisotopes play a bigger role in daily life than many people realize.
With a growing global population undergoing continuous urbanization, the need keep the lights on is more important than ever. It is expected that by 2030, electricity consumption will have doubled from 2007 levels, with a significant portion of that stemming from nuclear power. In fact, China alone has committed to adding 40 nuclear reactors to its fleet by 2020. Likewise, Russia and India have 25 and 24 reactors, respectively, in the planning stage.
However, there is currently not enough uranium available in order to meet the demands of these utilities. This is a supply shortfall that analysts have been heralding for several years, and with it, analysts expect to see a sharp increase in spot and long-term uranium prices. These supply and demand fundamentals are what make uranium an attractive investment.
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Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.
This article was originally published by the Investing News Network on February 2, 2016.