One
bonus of the global recession is that it wiped a lot of incompetent
hedge fund managers and energy speculators from the canyons of Wall
Street. As the Gordon Gecko sycophants regroup and look for the next
Big Thing, maximizing profit while minimizing risk, the landscape looks
very different than it did a year ago. In such a climate, it is
uranium, not oil and natural gas that would seem to have the brightest
future for one simple, overriding capitalist principle – supply and
demand.
Whatever
agreements are reached at December’s global climate warming summit in
Copenhagen, they can only boost uranium’s appeal, as the carbon
footprint of a nuclear power station consists primarily of the carbon
cost of mining uranium fuel, not a nuclear power plant (NPP)’s
operation. According a University of Wisconsin study, NPPs only emit
about 17 tons of carbon dioxide per megawatt, little more than wind and
geothermal power, the lowest sources. In contrast, coal has the highest
carbon emissions at about 1,000 tons per megawatt. Accordingly, expect
to see many nuclear power cheerleaders emerge in Copenhagen.
Consider
– two years ago, London’s World Nuclear Association in May reported
that worldwide, 256 reactors were either in the planning stage or under
construction. Even Ukraine, site of the infamous 1986 Chernobyl
disaster, has announced plans to build 22 new nuclear power stations,
while the United States, site of the 1979 Three Mile Island partial
meltdown accident, has 23 reactors being proposed. These new reactors
would be in addition to the 439 nuclear power reactors worldwide in 31
countries generating 372,000 megawatts reported by the International
Atomic Energy Agency, an increase of 58 percent, all needing fuel.
According
to the Wall Street Journal on November 29, “Iran announced a massive
expansion of its nuclear program. President Mahmoud Ahmadinejad
unveiled in a cabinet meeting plans to build 10 more nuclear facilities
for enriching uranium.”
The
nuclear issue even impacted last year’s U.S. presidential election, as
Republican nominee John McCain committed his administration, if
elected, to begin planning for the eventual construction of 45 new
nuclear power plants in the United States by 2030, twice the number
currently on the drawing boards.
Europe
is also interested in expanding its nuclear power industry, which
represents 45 percent of the world's currently operating nuclear
facilities and 33 percent of new reactor construction. European nations
currently operate 197 nuclear power plants generating 169,842
megawatts, and 12 European countries are planning or considering
proposals for up to 67 additional reactors.
The
story is the same in Asia. South Korea relies on nuclear energy to
produce 45 percent of the country’s electricity and Japan is not far
behind, relying on nuclear power for 30 percent of its energy needs.
Asia’s
economic powerhouses China and India are interested in nuclear energy
as well. India is increasingly interested in nuclear electrical power
generation despite the fact that nuclear currently accounts for a
paltry 3 percent to 4 percent of the country’s power needs; India has
19 planned and proposed nuclear power reactors.
Like
India, China is a relative newcomer to nuclear power generation,
deriving only 2.3 percent of its electricity from nuclear power,
compared with the United States' nearly 20 percent. Of China's 11
current NPPs; the oldest, Qingshan-1, only came online in 1991. China's
Commission of Science Technology and Industry for National Defense in
its 11th Five-Year Plan for the Nuclear Industry said China will
prospect for and develop indigenous uranium deposits in order to expand
the nation’s ability to produce 40 gigawatts of nuclear power
electrical generating capacity by 2020.
Further
accelerating China’s move towards nuclear power, on 26 November Prime
Minister Wen Jiabao announced his country’s plan to cut
carbon-emissions intensity 40 to 45 percent by 2020 compared to 2005
levels. Carbon intensity is the emissions produced per unit of economic
output, and in order to meet the target, China is apparently committing
itself to implementing ambitious energy-efficiency and fuel-switching
policies. Since most renewable and alternate non-fossil energy is in
the power sector, this would mean a much higher percentage of China’s
total electricity generation to meet these goals will need to come from
non-fossil fuel sources, including renewables and nuclear energy.
To be on the safe side, China is also developing a national uranium reserve, to commence in 2010.
Despite
Beijing’s ambitious attempts to expand uranium production in Xinjiang
and elsewhere however, local sources will be insufficient to meet
domestic needs despite country-wide prospecting. Analysts predict that
within less than a decade China's planned nuclear power reactors will
consume 44 million pounds of uranium annually, as more than 16
provinces, regions and municipalities have announced intentions to
build nuclear power plants within the next eight years — a total of 77
planned and proposed new reactors.
The
revival of interest in nuclear power in the wake of record high oil
prices and despite environmentalists’ opposition will prove a boon for
uranium-producing nations. Current global production of uranium is
approximately 40,000 tons annually. The math of the analysts quoted
above on China’s needs means that without increased production, China
alone would consume 55 percent of current world output within a decade.
Canada
currently leads world production, with 25 percent of the world's
output, followed by Australia. Kazakhstan is currently the world's
third-biggest uranium miner. The three countries currently account for
more than half of global uranium production. Other uranium mining
nations include the United States, the Russian Federation, Portugal,
Namibia and Niger, but those seeking reliable supplies must needs look
to the “Big Three.”
Kazakhstan
contains the world's second-largest uranium reserves, estimated at 1.5
million tons. In 2006 it produced 5,279 tons of uranium, 21 percent
more than in 2005.
But
Kazakhstan has ambitious plans to massively boost its output of the
silvery metal, as evidenced by this year’s production. Kazatomprom, the
country's national nuclear corporation, said in a press release last
month that the country boosted uranium output an eye-watering 61
percent year-on-year in January-September to 9,535 tons, 3 percent
above the government’s target for the period. Part of the reason for
Kazakhtatomprom’s success was opening five new mines last year.
According to Kazatomprom’s statistics, global uranium output in 2009 is
projected to be 11,000 tons in Canada, 9,430 tons in Australia and
12,800 tons in Kazakhstan.
Kazakhstan
is not only increasing its mine production, but moving to develop fuel
fabrication facilities in an effort to move from mining to the higher
value-added production of nuclear fuel fabrication.
Kazakhstan’s
nuclear fuel issue will be of keen interest in Moscow, as it is
currently a world leader in the technology. Despite its technological
mastery, unlike its dominant position in the world’s oil and natural
gas market, Russia’s footprint in the global uranium market remains
relatively small. Russian state holding company Atomprom is the world’s
seventh-largest holder of uranium ore reserves, the third-largest
producer of nuclear fuel but only the world’s fifth-largest miner of
uranium. Current Russian production is only 3,000 metric tons of
uranium ore out of an annual requirement of 18,000 metric tons.
Russia's
oldest operational nuclear power facility, Novovoronezh-3, came online
in 1971. The Russian Federation now operates 10 nuclear power plants
with a total of 31 reaktor bol'shoi moshchnosti kanalnii reactor units,
which supply approximately 16 percent of Russia's energy needs. Except
for the Bilbino Nuclear Power Plant in eastern Siberia, the other nine
complexes are all located in European Russia. Putin’s administration is
committed to expanding Russia’s nuclear energy use, noting in his 2007
annual address, “Over the entire Soviet period, 30 nuclear power plant
units were built, but we plan to build 26 such units over the next 12
years, and to do so using the most advanced technology available.”
As
with its oil industry, Kazakhstan has actively courted foreign
investment for its mining operations. Kazakhstan has signed multiple
contracts, including technology transfer agreements, with companies
from Canada, Japan, France, and China. The world’s leading producer of
uranium oxide, Canada’s Cameco, has a 60-percent share in Kazakhstan’s
Inkai uranium mining operation, while the state atomic energy agency,
Kazatomprom, the world’s fourth-largest producer, also has a stake in
Inkai. Nor is the investment one way; Kazatomprom, flush with cash, has
proposed purchasing a 10-percent stake in the U.S. company Westinghouse
Electric.
While
the price of uranium in the last several years has been volatile, the
overall trend of the last decade has been strongly upwards. In 2001 a
pound of uranium sold for between $5 and $10. Current prices in the
spot uranium market have trended between $40 and $50 all year after
having soared to $140 along with oil in 2007. The 2007 price resulted
from the end of Russian dumping, surging apparent increases in demand
plus massive liquidity via hedge funds and participation certificates,
plus, combining with the difficulty of valuing uranium stocks. Despite
these variables, given the projected construction and demand of NPP
plants worldwide over the next decade, even a cashiered Wall Street
analyst might be able to conclude that the price trend is likely to be
upwards.
Rio
Tinto's listed uranium subsidiary, Energy Resources of Australia CEO
Rob Atkinson, recently commented in The Australian that current
relatively low uranium spot market prices combined the effects of the
global recession are hampering mine development in a number of
countries, setting the scene for a future uranium shortage, noting,
“Given production issues that are going on across the world and the
(longer-term) demand from power stations, spot prices seem a bit out of
kilter at the moment.” Atkinson’s comments echoed an earlier report, as
the Royal Bank of Canada Capital Markets noted in a study, "Investing
in Uranium Companies," that a supply gap will exist in uranium after
2013. As
NPPs are licensed to run for 40 years, with many
re-licensed for another 20 years, new NPPs will not be replacing
existing plants, but only adding to demand.
Kazakhstan’s
nuclear policies have won it plaudits in the international community,
beginning when it voluntarily relinquished its Soviet-era nuclear
arsenal. Now the IAEA is considering Kazakhstan’s proposal to host a
nuclear fuel bank on its territory, a gesture that might yet cut the
international Gordian knot of Iran’s civilian nuclear program.
In
short, Kazakhstan is fast becoming a major player on the world nuclear
stage, even in the diplomatic sphere and its potential to increase its
share of the world’s uranium market is a certain bet over the next few
years, as it has its influence in the global oil market. Its
government’s relative stability and investor friendly climate are added
pluses, but for those Wall Street Masters of the Universe disinclined
to deal with President Nazarbayev’s regime, there are always profits to
be made in Namibia and Niger.
And, of course, China, Japan, South Korea and India are only too willing to pick up the slack.
This article was written by John C.K. Daly of OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com
