future of Uranium
With the prospect of 30 million pounds of uranium evaporating from the supply lines four years hence, Blackmont Capital research analyst George Topping sees sovereign stockpiling already beginning to make itself felt on the demand side of the equation. In this exclusive interview with The Energy Report, George says he sees the price nudging up to $65 by the end of this year, then to $70 in 2010, $80 in 2011 and $100 within five years.
The Energy Report: Let’s begin with some of your thoughts about uranium. Almost two years ago, spot prices hit a record $137 per pound. A year ago—well before the bottom fell out of virtually all the markets—the spot price dropped by nearly half, to the neighborhood of $70. You focus a lot of your attention on uranium. How do you see its future shaping up?
TER: You used the term “sovereign stockpiling” of uranium. So India isn’t the only country doing the stockpiling.
GT: No. And it isn’t only uranium. The Chinese, for example, have said that they’re obviously stockpiling oil right now. They’re actually just commissioning one of the world’s largest storage facilities for oil. In the same announcement, though, the Chinese said that they’d be stockpiling oil as well as other forms of energy. They have coal already and natural gas is not easy to store, but uranium is one of the easier ones to go out and buy and stick away in a strategic stockpile. Given that China has quite an aggressive build of power plants over the next several years, I wouldn’t be at all surprised to see China build up a significant stockpile.
I think you really have to look toward the developing countries such as India and China as the mainstay for demand.
TER: Will China still be building a stockpile if they’re in recession? Or would we have to wait to see China come out of the recession to start stockpiling?
GT: I believe that, as with oil, they’re not pausing at all due to their own slower growth. They’re carrying on with plans to stockpile metals, particularly metals they produce, actually, to support domestic industry, keep their own mines operating and lower the number of miners who are flung out of work domestically. They don’t want riots and people protesting. A lot of China’s actions address the desire to maintain jobs.
TER: Given this picture you’re painting of this massive shortfall in supply, it’s somewhat surprising to hear that you aren’t projecting the price to go up more rapidly as we move toward 2013. Energy is strategic to most countries and many of them, such as France, China and India, use a lot of nuclear power.
GT: It’s quite a jump. I’ve got it going up to $100 per pound. It could go a lot further if there’s no visibility of filling that hole in supply. But right now I think $100 a pound is fine.