As oil has been the "black gold" which has made many fortunes, some have started to call uranium "hot gold". The market for the dense, metallic element which fuels nuclear power stations has exploded over the past few years. Having languished at less than $10 (£5) a pound for much of the 1990s - which saw the closure of many uranium mines - its price shot up by 900pc between 2001 and 2006.
But now investors' appetite is cooling rapidly. After four years of non-stop rises, uranium hit $135 in June and then began to fall. In the past few weeks, it has slumped to $90.The uranium market's roller-coaster ride has left many investors with their fingers burnt, and has raised questions about whether the so-called nuclear renaissance - a push by governments around the world to build new nuclear power stations - will be economically viable.
John Busby, who wrote After Oil, a report on alternative sources of energy, said the experience of sky-high uranium prices over the past couple of years could put off private enterprises from constructing new nuclear power stations."Generators will be hard put to find the fuel for the current fleet of nuclear power stations, let alone to supply new entries to their fleets. Lack of uranium is likely to be the main factor in the discarding of the nuclear renaissance," Mr Busby said.
Some analysts say that while there has been welcome relief for buyers of uranium in the past few weeks, its price is still high by historic standards. And the swings in price will be unattractive for the nuclear industry, which invests billions of pounds to build reactors which last for 50 or more years. Bulls in the uranium market believe its price will rebound, though probably not to the heady levels of earlier this summer. They argue that the market overheated as hedge funds piled in but that it is now returning to normal, in part because hedge funds have scrambled to sell either direct holdings in uranium or in funds which hold the nuclear fuel due to a credit crunch they face in the wider stock market.One source said: "There have been some must-sells, but there are also guys sitting on the side who want to get in because they believe the fundamental story is very positive."
Several companies have sprung up to capitalise on the uranium boom, such as Australia's Paladin Resources, Uranium One, a Canada-based producing company, and Nufcor Uranium, an Aim-listed entity which directly owns uranium. All of these companies have seen their shares buffeted in recent weeks.
But Gary Stoker, marketing manager for Nufcor International, the world's biggest uranium trader and a shareholder in Nufcor Uranium, said: "The price got a bit frothy, accelerated by what was happening in the wider market, but the fundamentals have not changed."These fundamentals, according to Mr Stoker, are that demand for uranium will continue to climb but 40pc of supply by about 2012 will depend on new mines which have yet to be constructed. "There is a lot of speculation in those production plans," Mr Stoker said.
Nufcor and others say there is every reason to believe new production will not hit targets because, while uranium can be found in low concentrations in soil, rock and water just beneath the ground around the world, it is most cost-effective to mine it in certain places.
These include both highly regulated countries such as Australia and Canada, where official restrictions have hampered output, and volatile regions, such as Niger, where recent uprisings by the local Tuareg nomads have undermined announcements that the country is going to more than double its uranium output in the next four years.
Analysts say what is really happening in the uranium market is a shift from two decades when production dramatically undershot demand, with the shortfall being made up by a massive military and civil stockpile of the fuel built up by the US, Russia and others.
This deal, brokered as part of the ending of the Cold War, has led to about 50pc of the fuel in US power stations coming from old Russian nuclear warheads.
Over the next five years, that stockpile will dwindle, forcing the nuclear sector to rely much more heavily on newly mined uranium, which could lead to more fluctuations in world prices.
Some believe there will be a knock-on effect on whether a generation of new nuclear power stations are built to replace ageing reactors in the UK, US and elsewhere.
Mr Stoker said that if the price spiked to around $200 in the next few years, "that would certainly have an impact on whether new power stations are built or not".Meanwhile, major changes are afoot on the political front which will have a commercial impact on the nuclear sector and the uranium market.
Mark Fitzpatrick, a senior fellow at the International Institute for Strategic Studies, said the deal struck last month between the US and India to allow nuclear co-operation between the two was a "huge shift in US policy".
Australia has taken its cue from the US and agreed in principle to sell uranium to India, which will mean breaking its rule to sell uranium only to signatories of the Nuclear Non-Proliferation Treaty.
Mr Fitzpatrick said Israel and Pakistan can be expected to lobby for similar treatment from the US, and that several countries in the Middle East will push forward with nuclear building programmes for security reasons even if they believe civil nuclear power is economically unattractive.
Meanwhile, a consensus is finally forming around the US-led idea that a global fund of uranium should be created. This could be made available to countries pressing for nuclear power, and would help prevent some nations from developing uranium mining and enrichment know-how.
Some in the nuclear world believe uranium will settle down at between $50 and $70 in the long term - a price sustainable for both producers of the material and for the operators of nuclear reactors wanting to generate electricity. But in the meantime, there could be plenty of opportunities for unexpected twists for one of the world's hottest metals.http://www.telegraph.co.uk/money/main.jhtml?xml=/...ILC-mostviewedbox |
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