News of major M&A activity signifies that some of the biggest...

News of major M&A activity signifies that some of the biggest players in the industry think the bottom is nigh........


One positive aspect of slumping commodity prices, however, is that company valuations fall in concert, and those cheaper valuations catalyze merger and acquisition activity. Companies on the hunt for acquisitions always seek the best price, which means they try to time their takeovers with the bottom of the market. As such, news of major M&A activity signifies that some of the biggest players in the industry think the bottom is nigh, and that information can help start a rally.

Uranium is certainly primed for a rally. It matters not that Germany is phasing out nuclear power, nor that Italy and Switzerland cancelled plans to build new reactors, because the industrialized world is pretty unimportant when it comes to uranium demand growth. That growth is coming from the developing world, with China leading the charge. There are 26 reactors under construction in China, with another 52 planned and a further 102 proposed. China suspended approvals of new plants in the wake of Fukushima, but at the beginning of August the China Nuclear Energy Association completed a nationwide safety inspection and observers expect the Chinese to resume new approvals shortly.

China is not alone in developing significant new nuclear power capacity. India has six nuclear plants under construction and 57 planned or proposed, while in Russia there are 10 reactors being built and another 44 planned or proposed. In fact, there are now a total of 558 reactors under construction around the world, up from 540 at the start of the year.

Overall, demand is absolutely set to outstrip supply in the coming years. That means the price of uranium is set to climb. This is something we have spoken and written about at length since Fukushima thrust nuclear power into the spotlight and sent uranium prices on their inexorable downhill slide.

READ MORE: http://www.stockhouse.com/Columnists/2011/Sept/1/Takeover-bid-may-stabilize-or-end-uranium-s-slide