The Future of Nuclear

With all the talk about shale gas, I want to make sure you don’t forget about other energy bull markets that are forming.

We all know oil’s back over $100 as the economy starts to rebound.

And natural gas prices are at decade lows because of abundant new supply.

But what’s up with uranium?

If you remember, there was a mania-stage bull market back in 2007 when per-pound uranium prices ran from $70 to $135 in six months.

The financial collapse brought prices back below $80 by the end of that year, and they continued to skid for three years, settling in the low $40s by summer 2010.

A rebound in uranium prices started in late 2010, and they rose to $65 by March 2011.

Then the Japanese earthquake happened and prices fell back to $50, where they stayed until very recently.

All this is better represented in a chart, so take a look at uranium prices since December 2006:

click chart to enlarge

In recent sessions, uranium spot prices have started drifting higher.

This is part of a larger trend I’ve been telling you about since last August (here and here), and I want to discuss it again today to make sure you’re in a position to profit.

The Uranium Bull Case

For starters, the U.S. Energy Information Administration recently leaked some figures from its Annual Energy Outlook 2012, which is due out in full later this year.

They show that “total electricity consumption, including both purchases from electric power producers and on-site generation, grows from 3879 terawatt-hours (TWh) in 2010 to 4775 TWh in 2035.”

That’s a 23% increase — and that electricity has to come from somewhere.

The EIA forecast shows “electricity generation from nuclear power plants is predicted to rise by 11%, from 807 TWh in 2010 to 894 TWh in 2035, accounting for some 18% of total generation in 2035.”

And that’s just here in the United States…

I recapped the global picture for you last month, saying:

There are 433 working reactors already in existence, 62 under construction, 156 planned, and 343 proposed. “Planned” means they’ll be operable in 8-10 years; “proposed” means operation within 15 years. (Click here for a full list.)

And even with Germany planning to decommission its nine remaining reactors by 2022, there will still be net 93 new reactors by the end of this decade. China alone — with 26 reactors under construction — will offset the German loss nearly three times over.

That’s without mentioning India, which has committed to growing nuclear to 25% of its energy mix up from 2.5%, and its uranium demand will climb tenfold in the process. Already, more than half of India’s nukes aren’t running at full throttle because they can’t secure enough uranium.

Tim Gitzel, CEO of Cameco (NYSE: CCJ), the largest uranium producer in the world, summed the uranium demand situation up best when he recently said:

The game these days, the growth game at least, is over in Asia. And that’s a change for everyone. China has not blinked an eye. They have today 14 reactors in operation, 26 under construction, and then another 20 in addition to that, planned by 2020. That’s growth we haven’t seen, oh boy, since the 1970s.

The uranium demand picture is clear: It’s growing.

Supply Isn’t Growing

I’ve gone on record saying there could be a uranium shortage by 2014.

In reality, there already is a shortfall — and that’s part of the reason uranium prices are starting to climb.

You see, in 2010 the world needed 65,000 tonnes of uranium. Only 53,663 tonnes were mined.

The difference was made up through an agreement with Russia that turns demilitarized uranium into nuclear fuel. But that program ends next year, and over 10,000 tonnes of uranium will disappear with it.

It doesn’t look like miners will be able to ramp up supply fast enough to make up the difference, so prices will necessarily rise.

All these reasons are why I’ve been calling for a uranium bull for months.

We’re starting to see it now.

A New Way to Play

The standard ways to play, as I’ve told you many times before, are through uranium miners or uranium ETFs.

But there’s a more interesting way to reap profits from rising uranium prices you may not be aware of.

You see, many long-standing uranium mines are starting to see declining output levels. So no matter how high the price climbs, they can only sell what they have.

But new research has shown a way to get more energy from existing uranium supplies…

By bonding certain metal oxides to the uranium fuel, utilities can generate more electricity with the same amount of uranium. And as the price of uranium continues to climb, the technology will only become more valuable.

Instead of having to find, mine, and buy expensive uranium, the nuclear industry can turn to this technology to get more from what they have.

Call it like you see it,

Nick Hodge

@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.

*Follow Outsider Club on Facebook and Twitter.