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Published: December 16, 2009
China is aggressively preparing for its energy future in order
to accommodate rapid economic growth for decades to come. The
foundation of the nation’s electricity generation plan is coal,
but with loud calls coming from around the world for China to
cut its output of greenhouse gases, a significant portion of new
power will be nuclear.
From an investment perspective, China’s growing interest in
nuclear power will provide enormous investment opportunities
over the next few years. Some analysts say the price of uranium,
while soft now, could double over the next couple of years.
China’s nuclear capacity is now less than 9,000 megawatts, but
the country has more than a dozen more plants either under
construction or in the planning stages. According to figures
from the brokerage CLSA, the capacity could grow fivefold by
2015. The official target is 40,000 megawatts by 2020.
Such an ambitious program raises the question of how to fuel all
of the new plants that China wants to bring online in the next
decade. Where will all of the uranium come from to handle this
new demand?
China is not alone in its nuclear ambitions. Earlier this
year, the International Atomic Energy Agency (IAEA) projected
that global nuclear capacity would grow from about 370,000
megawatts (14 percent of world energy consumption) now to as
much as 540,000 megawatts by 2020 and 810,000 megawatts by 2030.
In dollar terms, capital expenditure on nuclear plants could
total more than $500 billion over the next 20 years.
Roughly 40,000 megawatts of nuclear capacity are now being built
on four continents, with China accounting for a quarter of that
total, well ahead of #2 Russia and #3 South Korea. The chart
below shows that China will be second only to the US in terms of
future capacity when projects at all phases are completed.
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China has uranium reserves within its borders and it is
aggressively lining up supplies in Central Asia, Africa and
Australia to make up any shortfall. But this shortfall is large
and growing. According to a recent Reuters story, China can
supply only a third of the 10,000 metric tons of uranium
annually required to meet its 2020 nuclear capacity target.
The World Nuclear Association says the world’s measured uranium
resources are sufficient to last 80 years at current usage
rates, with the largest untapped deposits found in Australia,
Kazakhstan, Russia and Canada. But just looking at China makes
it clear that usage rates are soon to see a sizable increase.
Nevertheless, worldwide uranium production is unlikely to
increase until uranium prices increase.
Uranium prices shot up to more than $135 per pound in 2007,
after the first new nuclear power projects began emerging. But
uranium subsequently slumped back down to $40 a pound, as
above-ground stockpiles flooded into the market.
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Looking forward, however, rising demand for nuclear power
seems likely to produce rising prices for uranium. In fact, some
analysts expect the uranium price to reach $80 a pound by 2011.
-- Romeo Dator
Contributor
The Daily Reckoning
Editor's Note: This
article originally appeared in
The Daily Reckoning. |
