Even Higher Uranium Prices Ahead This Summer, Part One
By: James Finch | Posted: 12th June 2006
Will we see a dramatic spike in uranium prices this summer? Some industry insiders have forecast spikes that could send uranium soaring to between $55 and $100/pound. Most were probably not expecting this to occur during 2006, but it might occur before Labor Day. There are several reasons we believe something could crack wide open in the uranium market over the next 100 days.
RUSSIA
Let's take the Russian situation. U.S. utilities have been somewhat lackadaisical about uranium pricing because they've been getting Russian uranium on the cheap. Russia's
Rosatom head Sergei Kiriyenko has reportedly told U.S. utilities there will be no HEU-2 deal. Whether this is a ploy to extract a better deal for Russia, or Russia's announcement it will feed other nuclear-ambitious countries with its uranium is not known.
U.S. utilities are now lobbying the U.S. Commerce Department to end the restrictions on importing enriched Russian uranium. They like the pricing, and are now arguing that higher uranium prices are jeopardizing the nuclear renaissance in the United States.
Because of rising uranium prices, 85 percent of the utilities, which operate nuclear facilities, have formed AHUG (Ad Hoc Utility Group) to terminate the import restriction. If AHUG accomplished its goal, the loser would be USEC, which is now arguing on America's "overdependence" of nuclear fuel. USEC depends upon the Russian uranium to fund its future enrichment facility program. In one way, this amounts to corporate welfare. USEC is arguing against unlimited Russian uranium.
U.S. utilities are now being fed about 50 percent of their nuclear fuel from decommissioned Russian warheads. Russia is more than a tad upset because the deal they made does not reflect the current spot or long-term price of uranium. Something will likely occur at the G8 Summit in St. Petersburg, Russia on July 14-17. Russia will chair this summit for the first time.
Expect fireworks. On the official G8 website, Russian President Putin announced, "Russia, as the presiding country, regards it as its duty to give a fresh impetus to efforts to find solutions to key international problems in energy, education and healthcare." It should be noted that Russia is now the world's second largest oil exporter behind Saudi Arabia. Russia is also hoping to reach a deal in joining the World Trade Organization before the summit opens.
We believe Russia may exacerbate the current tight supply situation in the uranium markets and cause prices to rise after the summit. On June 9th, Russia's news service Novosti reported the country would start constructing two nuclear power units per year inside Russia beginning in 2007. Kiriyenko also announced Russia would ramp up to four or five nuclear reactors for 2009-2010. President Putin plans to build an international full-service nuclear fuel center in Russia to provide enriched uranium for the growing number of countries wanting nuclear energy programs. It would be hardly likely Russia would provide additional uranium to U.S. utilities in that context.
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James Finch contributes to StockInterview.com and other publications. Sign up for his free newsletter at http://www.stockinterview.com and get the latest updates. You can always write to James Finch at jfinch@stockinterview.com
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James Finch is a contributing editor for StockInterview.com and other publications. http://www.stockinterview.com
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Tags: ploy, industry insiders, commerce department, s commerce