Sun will rise on uraniumTHE AUSTRALIAN April 08, 2014 12:00AMIt...

Sun will rise on uranium
THE AUSTRALIAN April 08, 2014 12:00AM

It is not an ideal to be a uranium producer. In fact, it has not been ideal since March 11, 2011, when a large earthquake triggered a 15m tsunami that caused Japan’s ­Fukushima nuclear power plant to melt down.

The tsunami-triggered meltdown took uranium prices down with it, and they are yet to ­recover. Pre-tsunami, uranium was trading at more than $US70 a pound.

Last week the spot price for the radioactive material was looking friendless at $US33.90 a pound. But with nuclear power still covering more than 11 per cent of the world’s electricity demand (more than 20 per cent in OECD countries, according to the World Nuclear Association), the shortfall between supply and demand — currently met by drawdowns on reprocessed weapons-grade material and stockpiles — means uranium will again have its day in the sun.

The new and growing imperative behind the broad agreement that long-term average for uranium is going to be somewhere north of $US60 a pound is the building of new nuclear capacity in China.

China has a real problem with pollution, which sort of comes with its annual burning of 3.5 billion tonnes of coal in support of its urbanisation and industrialisation drive. To put that in context, and to make that point that the environmental attacks on the Australian coal industry are missing the main target, Australia produces about 420 million tonnes of the black stuff, which is mostly exported.

There have been plenty of mumblings out of Beijing that improving air quality is right up there with all of its long-term plans. Apart from anything else, China’s choking air quality has become an international embarrassment.

Nuclear power is part of the solution, thanks to its super-low life cycle carbon emissions, which almost put it on par with wind and hydro-electric power.

And that is why, as mentioned earlier, the long-term uranium price assumption is a multiple of the current spot price.