Long-Term Outlook for Uranium Continues to Improve

The long-term outlook for uranium continues to improve as countries such as Japan and China place emphasis on nuclear energy.

Mar 29, 2014 at 1:21PM

Last month, the uranium market got a big boost from a draft of Japan's new Basic Energy Plan. Indeed, the long-term outlook for uranium market and producers such as Cameco Corporation (NYSE:CCJ), Denison Mines (NYSEMKT:DNN), Paladin Energy, Areva, and Rio Tinto's (NYSE:RIO) subsidiary Energy Resources has certainly improved due to supply cuts and anticipated demand.

One of the key drivers for uranium market in the long term will be China, which already has 20 nuclear reactors in operation and is constructing 28 more. A statement from Chinese President Xi Jinping this week has highlighted the fact that the world's second-largest economy sees nuclear energy playing an important role in ensuring its energy security.

Uranium making a comeback
The spot price of uranium has continued to hover around $35 per pound, down 50% from the price prior to the Fukushima power plant meltdown in March 2011. Still, the long-term outlook for uranium has certainly improved as nuclear energy is once again being seen favorably, especially by emerging economies such as China, India, and Russia. Even before a draft of Japan's new Basic Energy Plan came out, the outlook for the uranium market had been improving, mainly due to a supply cut from miners such as Paladin and Cameco and anticipated demand. Much of that demand will come from China.

China will be key driver
According to the World Nuclear Association, China is constructing 28 nuclear reactors. That is nearly 40% of the nuclear reactors being constructed globally. In fact, China's nuclear energy growth was something even Cameco noted in its outlook for the industry. The company noted that China brought three nuclear reactors online in 2013.

China's focus on nuclear energy can also be gauged from the fact that the country's top nuclear companies are getting ready for initial public offerings. According to The Wall Street Journal, the companies are hoping to raise money to fund future nuclear reactor construction.

China's emphasis on nuclear energy stems from the fact that the country is looking to cut its reliance on coal and tackle its serious pollution problems. Still, in the post-Fukushima world safety is a major concern when it comes to nuclear power plants. But a statement from China's President suggests that the country remains committed to nuclear energy even as it places a great deal of importance on safety.

China's commitment
Earlier this week, speaking at the Nuclear Security Summit in The Hague, China's President Xi Jinping said that development and utilization of nuclear energy gave new impetus to the progress of humanity. While Jinping noted that the development of nuclear energy has its associated risks and challenges, he sees the peaceful use of nuclear energy as important to ensuring security and tackling climate change. Jinping's statement, while placing a great deal of importance on safety, highlights China's commitment to nuclear energy.

Long-term outlook
While the debate over safety of nuclear power plants continues three years after the Fukushima meltdown, the future of nuclear energy is certainly secured. The statement from Jinping and Japan's energy plan highlights the fact that nuclear energy will play an important role in securing energy needs in countries that have limited energy resources or are looking to tackle pollution problems. In fact, in Germany, which has closed eight nuclear reactors and plans to shut down the remaining reactors by 2022, there have been calls to delay the phase-out nuclear power plants in order to cut reliance on Russian gas in the wake of the Ukrainian crisis.

Given this scenario, the long-term outlook for the uranium market is continuing to improve. Not surprisingly, Cameco shares have outperformed the S&P 500 so far this year. While Cameco shares have fallen nearly 4% this week, investors should look at the pullback as a buying opportunity.

America's plan to take the crown back from China
For the first time since the early days of this country, we're in a position to dominate the global manufacturing landscape thanks to a single, revolutionary technology: 3D printing. Although this sounds like something out of a science fiction novel, the success of 3D printing is already a foregone conclusion to many manufacturers around the world. The trick now is to identify the companies -- and thereby the stocks -- that will prevail in the battle for market share. To see the three companies that are currently positioned to do so, simply download our invaluable free report on the topic by clicking here now.


Varun Chandan Arora has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers