Observers have been warning for some time that China's sizable nuclear power ambitions haven't yet seen it sign the expected long-term contracts to secure uranium, the essential fuel of nuclear reactors. But that may now have changed. Analysts at Macquarie Bank estimate that China imported 39m pounds of uranium last year, up some three-fold from 2009.
This buying has "removed unprecedented amounts of future supply", say the analysts, who calculate a resulting deficit of 17 per cent in 2010, with supply to US and European utilities uncertain beyond 2012. With the deal to decommission nuclear warheads coming to an end and few new mines on the horizon, the uranium price could be set to rise substantially above its current $70 (44.13) per pound.
The China Daily quotes Zhang Guobao, former director of the Chinese National Energy Administration, as stating that China will approve another 10 nuclear power projects during the 12th five-year plan (2011-2015). China is believed to have more than 25 nuclear plants already under construction with more due to start construction soon as it looks to generate 5 per cent of its power from nuclear by 2020.
The world's second-largest economy currently generates only 2 per cent of its power from nuclear and the growth in new stations will exacerbate any supply tightness. Nuclear plants require three times their ongoing requirement of uranium for their initial fire-up.
This is positive for uranium miners such as Kalahari Minerals and Vane Minerals. The Macquarie analysts highlight the potential for shares to trade at significant premiums to net asset value when prices are rising, with producers likely to command the highest multiples.
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