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2011 was a challenging year for investment in the uranium industry. However, the new year offers fresh opportunity to build on some positive news that began to gain traction in the latter half of 2011.
By Dave Brown – Exclusive to Uranium Investing News
Sentiment trading on fears of an economic collapse in Europe originating from overall sovereign debt crisis will likely persist, while United States politicians may be unwilling or unable to address federal debt and unemployment leading into a presidential election year. Although these macro trends are likely to continue, more uranium and nuclear industry specific developments could create a much more positive investment outlook.
Though the underlying investment trends for the 2011 uranium market were directly impacted by the nuclear tragedy at Fukushima in March, Gavin Wendt, Founding Director & Senior Resource Analyst at MineLife foresees a longer term bullish uranium investment thesis. “From a broader perspective, the history of the past 30 years in the uranium industry with respect to previous incidents at Three Mile Island in the USA and Chernobyl in the Ukraine demonstrated that base demand did not fall, as existing reactors in use worldwide were not shut down,” Wendt told Uranium Investing News.
Sober second thoughts
Some of the reactionary policy changes and nuclear public safety issues which immediately surfaced last spring may now be revisited following some months of careful deliberation. Challenges that European governments are facing in terms of balancing budgets could actually see the uranium industry benefit as older nuclear reactors that are reassessed may be permitted to stay open longer. This new year has already begun to see a glimmer of this, as on January 2, a new government in Spain announced that it may allow an aging nuclear plant to stay open beyond a 2013 deadline for closing set by a previous administration.
Although nuclear energy may not be the most popular choice for sourcing electricity among individual citizens, governments will have to make difficult decisions based on unrealistic expectations set out by these citizens. Wendt explained, “realistically in a world with burgeoning populations in emerging countries that are short on energy, there are going to be greater demands placed on all three forms of traditional energy: coal, gas and nuclear.”
Resilience in the United States
At the end of last month, the United States’ Department of Energy Secretary Steven Chu issued a statement in support of the Nuclear Regulatory Commission’s decision to certify Westinghouse Electric’s AP1000 nuclear reactor design, marking a noteworthy stride towards new generation nuclear reactor build. Secretary Chu said, “The Administration and the Energy Department are committed to restarting America’s nuclear industry – creating thousands of jobs in the years ahead and powering our nation’s homes and businesses with domestic, low-carbon energy. Today’s decision certifying the AP1000 reactor design marks an important milestone towards constructing the first United States nuclear reactors in three decades.” The current United States administration committed last February to an $8.33 billion conditional loan guarantee for operations of two AP1000 reactors to be built in Georgia.
China should continue to generate headlines for nuclear growth
China already has four AP1000 reactors under construction, the first of which are expected to generate power in 2013. These nuclear reactors use an original design for the buildings, although forthcoming ones are to use a later specification and would therefore match future United States and United Kingdom units. Wendt believes China will be an important role player, “As far as the Chinese are concerned, the gloom in uranium markets couldn’t have been better timed as they look to secure strategic sources of clean, cheap energy to power their economy for the coming decades. “This should be a positive for the industry and I remain confident with respect to the medium to longer-term nuclear energy picture and anticipate that uranium prices and uranium equities should begin to recover during 2012.”
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.