Sometimes it's right there in front of your face, obfuscated only by confirmation bias. Here's one of those things: The world is going nuclear. It has been for years now. But the Fukushima-spawned fears kept many from pounding the table on it too hard. Now, Fukushima is almost five years behind us... and world leaders and string pullers can get back to openly declaring their love for the clean energy nuclear creates. Given how downtrodden the uranium sector is (The Global X Uranium ETF is down 88% in five years) fortunes will be made as nuclear energy returns to global favor and a looming shortfall sends prices higher. I've said that a million different ways over the past year. So I won't rehash the same argument here. What I will do is share some recent headlines and anecdotes that point to the spring coiling incredibly tight for the uranium sector and related equities.
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Who Sees a Coming Uranium Bull?Raymond Goldie, senior mining analyst at Salman Partners, sees one coming. He told the Investing News Network this month that uranium prices will hit $80 to $85 over the next three years with this explanation:“We refer to the day when security of supply becomes of concern to producers as the ‘pinch-point TM.’ We expect to reach the ‘pinch-point TM’ by early 2016, by which time we expect utilities to feel compelled to begin signing long-term contracts in order to ease concerns about security of supply, with those concerns – and spot prices – peaking in Q1 2018.”He's not the only one...Respected uranium analyst Rob Chang from Cantor Fitzgerald was quoted this year saying of the uranium price:“We are going to see it jump $5 to $10 every week, like we saw before, because it just has to happen that way. I’m not sure exactly when this will happen, but there frankly is just not enough supply. It’s a very thin market, and once you get two, three, four utilities trying to buy at the same time, you are going to see large jumps.”Morningstar sees a coming uranium bull market as well. A report it published earlier this year concluded:We believe the market overemphasizes the current supply glut caused by delayed Japanese reactor restarts. This situation won't last much longer. Early contracting by utilities means we see significant price increases by 2017.Mined supply of uranium will struggle to keep pace amid rising demand and falling secondary supplies. Low uranium prices since Fukushima have left the project cupboard bare.We expect global uranium demand to rise 40% by 2025. Annual growth of 2.8% might not sound like a lot, but is massive for a commodity that has seen precious little demand growth since the 1980s. Consider that average annual copper demand growth of less than 3% from 2002 to 2012 was enough to drive a 336% price increase.And if uranium prices go up that much... these companies will go up thousands of percent.Who else sees a coming uranium bull? Rick Rule, Mickey Fulp, Former Energy Secretary Spencer Abraham, Dundee analyst David Talbot, and plenty more.But perhaps more concrete is who is driving this coming bull.
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Who Wants Nuclear Energy?Japan, for starters. It is now restarting the 40-some reactors that have been idle since 2011. It says 10% of its fleet could be back online early next year, and has committed to nuclear supplying a quarter of its energy as far out as 2020.Turkey, Belarus, Vietnam, Bangladesh, Poland, and Jordan are all planning plants as well.Argentina has commissioned two new reactors from China and one from Russia at a cost of $20 billion.The United Arab Emirates has hired the South Koreans to build four reactors at a cost of $40 billion.Nigeria has commissioned the Russians to build and maintain four reactors at a cost of $80 billion.Saudi Arabia wants to build 16 new reactors in the next 20 years, and has signed agreements with France, China, and South Korea to do so.China is the most ambitious. It has 23 operating rectors. It will have 86 by 2025. Its need for uranium will grow commensurately — 167% from 6,296 tons per year to 16,800. Bloomberg says that kind of growth is enough to unlock the “uranium motherlode.”Earlier this month China and France signed a renewed nuclear partnership that will see China National Nuclear take a minority stake in France's Areva.And just a few weeks ago the U.S. and China entered into a new nuclear cooperation agreement that's expected to generate over $200 billion in economic benefit to the U.S. as we sell them Westinghouse AP1000 reactors.That's why Obama so strongly supports nuclear energy (and despises the Keystone Pipeline). It will be worth hundreds of billions to the U.S. — not just as a source of clean energy, but as an export to other nuclear-hungry nations.That's why the White House released a special fact sheet this month that outlines steps to ensure “nuclear energy remains a vibrant component” of Obama's energy strategy.The nuclear renaissance is here.Those who are paying attention are in store for some serious profits.Call it like you see it,Nick Hodge@nickchodge on TwitterNick is the Founder and President of the Outsider Club, and the Investment Director of the thousands-strong stock advisory, Early Advantage. 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.
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