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Serve Yourself a Piece of Yellow Cake

Uranium traders have been stunned by a sudden Chinese effort to corner the supplies in an effort to fuel the world's most ambitious nuclear program.

The once moribund market now suddenly sees buyers everywhere as the Chinese ramp up their purchases to 5,000 tonnes this year, double their current consumption.

The emerging nation plans to build ten new plants a year for the next decade, boosting their electricity supply up from 9.5 to a massive 85 gigawatts. That will make China the world's largest nuclear power generator.

Uranium peaked at $136 a pound in 2007, and collapsed during the financial crisis to as low as $26. High prices also brought a flood of new mines, with 27 coming on line in the past decade. Last year, the total uranium market amounted to 50,572 tonnes. China will need a third of that in ten years, and India another fifth.

Prices have since crawled back up to $31/pound, and some analysts are predicting a double or more in five years. Producers have seen share prices pop in the last few days.

I have been a long term bull on uranium and the entire nuclear industry, predicting that it was only a matter of time before the Middle Kingdom's immense appetite for yellow cake overwhelmed supplies.

It may be time to add some new names to your watch list, like Paris listed Areva SA (CEI:FP), Australia's Paladin Energy Ltd. (PDN:AU), and my favorite, Cameco (CCJ). Or you can take a shot at trading the illiquid uranium futures directly on the NYMEX.

By. Mad Hedge Fund Trader


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Leave a comment
  • Anonymous on July 16 2010 said:
    Cameco has some gold exposure, too, doesn't it? At least, they used to.
  • Anonymous on July 17 2010 said:
    Funny, isn't it, how certain organizations and countries have become so smart, while others are mired in stupidity. The Chinese know, like I know, that nuclear is the key to future prosperity. Despite their talk about renewables and alternatives, they are going to make sure that they have the reliable and inexpensive energy needed to make those other energy options work.
  • Anonymous on September 06 2010 said:
    You are correct about the major theme of your article but for accuracy sake, the physical U-price never got lower than $40/lb. after the financial crisis of 2008. And it has been "churning" between $40 and $52 since then. The price hasn't really YET been affected by Chinese buying like other metals and commodities mostly because of rising production from Kazakhstan. However, I believe that is soon to change. The U-price has risen 15% in the past few months and looks like it is ready to break into the $50's again, which should attract financial players, once more. Will we see $100 again any time soon, to the chagrin of utility fuel buyers?? I think, perhaps so!

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