Uranium Price Rise Spurred by Hedge Funds on Energy Optimism

A 62 percent surge in uranium prices
in the past year has been partly driven by hedge funds as money
managers bet more atomic energy will be generated, the Chief
Executive Officer of the world's biggest uranium producer said.
The price of uranium, used to fuel nuclear reactors, climbed
to $29 per pound from $17.90 per pound a year ago, according to
the Metal Bulletin's Uranium Nuexco Restricted Post Price. About
20 percent of the uranium that powers reactors trades on spot
markets.
``We've seen speculators and hedge funds buy between 5-to-6
million pounds of uranium in the last two years,'' Cameco Corp.
CEO Gerald Grandey said today at a news conference. ``The timing
of their purchases has helped to solidify the market price.''
Hedge funds are driving up prices as countries commit to
building new nuclear power plants. China's planning a six-fold
increase in atomic energy over the next 15 years, the government
has said. Egypt, Indonesia, India, the Philippines and Vietnam
are planning new nuclear installations. Uranium accounts for
about 5 percent of the cost of producing atomic energy.
The price rise is spurring mining companies to step up
uranium exploration to boost stockpiles. Suppliers are selling
users of the radioactive metal, such as utilities, from stocks
developed in the 1970s.
``We've been living on inventories for two decades,'' said
Grandey, speaking at an International Atomic Energy Agency
conference about the uranium market.

Abundant Supply

There's enough untapped uranium in the world to satisfy 2002
nuclear energy demand for up to another 240,000 years, the IAEA's
2004 Nuclear Technology Review reports.
Most uranium can be recycled. Many nuclear power plants can
be converted to use so-called ``fast reactor fuel cycles,'' which
use uranium up to 100-times more efficiently.
``We know that we'll have customers well into the 2030-to-
2040 time period,'' Grandey said. Most of Cameco's customer
agreements are long-term supply contracts, he said, estimating
that the Saskatoon, Canada-based company conducts only 10
transactions each month.
Nuclear missiles in the U.S. and Russia house ``at least''
another 30 years worth of energy, IAEA Deputy Director General
Yury Sokolov said. A 1993 agreement called the ``Megatons to
Megawatts Program'' has disarmed around 9,000 warheads and
shipped their fuel to power plants.
The IAEA in March raised its forecast for nuclear power for
the fourth consecutive year. The equivalent of 127, 1,000-
megawatt plants will be built by 2020, the IAEA said then.
Capacity will rise to 427 gigawatts from 367 gigawatts today. One
gigawatt is a billion watts.

Attractive Economics

Atomic energy is becoming economically more attractive as
the price of oil and natural gas rise. Crude oil prices in New
York have surged 56 percent in the past year.
The Kyoto Protocol is also prompting countries party to the
treaty to consider nuclear energy to reduce the emissions
produced by gas- and coal-fired plants. Public concern about
safety may be easing, polls show.
Asia will drive demand, Alan McDonald, an IAEA economist,
said in April. China now relies on coal and oil for 90 percent of
its fuel. The country plans to get 40 gigawatts of electricity
from nuclear power by 2020, up from 6.5 gigawatts today, he said.
India is building nine reactors and will increase capacity
to 20 gigawatts by 2012 from 2.7 gigawatts currently.