The Must-Have Commodity for 2011: Uranium


"Uranium producers are the most direct play on rising demand."

Uranium, like any other commodity, is subject to violent price swings, so you can make a mint or get your face ripped off. Even though uranium prices have risen substantially since last summer, I believe opportunity yet exists for the savvy investor.

Hardly rare, uranium is more abundant than gold or silver—but that doesn't mean it's readily available either. For one, more than half of world production comes from 10 mines in six countries, which means that political hitches and mining delays can, and do, produce supply shocks. Also, starting a new mine, or even expanding an existing one, is no quick feat.

Then there's the favorable demand picture, summed up below:
  • Against a worldwide total of 441 nuclear reactors currently in operation, 63 new reactors are under construction, with another 156 on order or planned.

  • Existing mines currently furnish only about 75% of consumed uranium, with the balance supplied by secondary sources such as decommissioned warheads. Such sources are finite in nature, and a major Russian supply program is slated to expire in 2013.

  • No surprise, China is a heavy at the uranium table. The country plans to increase its existing nuclear capacity roughly ninefold by 2020, a target that a government official recently indicated may be conservative.

  • Finally, global electricity consumption is projected to nearly double by 2030, yet nuclear power plants supplied only 14% of 2009's worldwide electricity production. Translation: there's ample room for nuclear energy production to grow.
So far, there's no ETF or ETN linked to uranium futures. Even if there was, I'm not sure I'd recommend it. . .uranium producers are the most direct play on rising demand."

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