This Sleepy Commodity Is Ready To Roar
I’m sure you saw it…
In fact, you’d be hard pressed to find someone who doesn’t recall the remarkable footage.
It was a little over a year ago when a huge wall of churning, debris filled seawater ravaged the Japanese coastline. Houses, semi-trucks, cars, boats- they all fell victim as the violent tsunami washed ashore.
The resulting devastation was (and still is) incredible. Entire towns were wiped off the map, and many thousands of lives were turned upside down. What’s more, Japanese authorities are still wrestling with the Fukushima nuclear disaster.
It’s a horrible situation by anyone’s standards…
However, amidst plenty of controversy, Japan is on the verge of restarting their nuclear reactors. Japanese Prime Minister Yoshihiko Noda is expected to the give the green light in coming days.
Why the push for a nuclear restart when Fukushima is still causing so much angst?
It’s simple economics.
The energy-starved country is reeling from the loss of cheap nuclear power. Before the quake, nuclear power provided nearly 30% of Japan’s electricity supply. But for the past year, the country’s been relying on coal, liquefied natural gas, and oil imports to power their grid.
And that’s a problem…
While these imports have been a good temporary fix for Japan, they’re not a long-term energy solution. The imports are just too costly for the island country. In fact, many economists believe Japan must restart their nuclear program quickly or their economy will suffer the consequences.
But Japan isn’t the only one getting back in the nuclear game.
After a lengthy nuclear safety review, China’s expected to resume construction on their burgeoning nuclear power program. And let’s not forget India, South Korea, and Russia. These emerging market economies are expected to go ahead with substantial nuclear expansion in coming years.
According to the World Nuclear Association, 61 reactors are currently under construction worldwide with plans for another 162.
What’s that mean for uranium prices?
As you may know, the Fukushima disaster sent the price of uranium (the key ingredient in nuclear reactors) falling like a stone in early 2011. And for the past year, uranium has been stuck around $50 a pound.
But that may be about to change…
Japan’s pending restart, mixed with strong global nuclear expansion, will likely wake uranium bulls in the near future. Many analysts see the essential mineral testing $74 a pound as demand rises in coming years.
How can you profit from rising uranium prices?
One of the easiest ways to invest is through the Market Vectors Uranium+Nuclear Energy ETF (NLR). The fund holds companies with exposure to nuclear energy such as Exelon (EXC), Cameco (CCJ), and Central Vermont (CV).
Bottom line…
The horrific Japanese earthquake set the nuclear industry back for a while. But investors are starting to realize the setback is temporary. As emerging economies continue growing, nuclear power will be an essential cog in the global energy portfolio.
Until Next Time,
Justin Bennett
Category: Commodities
