Other fuels have boom-and-bust cycles. So why not uranium?
But perhaps befitting an atomic fuel that decays rather slowly, uranium's commodity price swings appear to be unfolding over generations instead of years. From the 1950s through the 1970s, when uranium was being used in nuclear weapons, and later, nuclear power plants, it was selling at a hefty price. Then the market got a one-two punch: first, when the tide turned against nuclear energy in the United States after Three Mile Island, and a decade later, when the Cold War ended and weapon stockpile uranium became readily available.
The price was less than $10 a pound in the 1980s and fell to a low of $7 a pound in 2003. But then, the same growing global demand for energy, particularly in Asia, that has pushed up oil prices also began to drive up the price of uranium. With new nuclear power construction proceeding apace in other countries, the price of uranium rose to $40 per pound in 2006 and hit an all-time high of nearly $140 per pound one year ago. Since then, the price has receded somewhat, bouncing around in the $75 to $95 range—about what it was in the 1970s, when adjusted for inflation.
Last week, at the Nuclear Energy Institute's presentation on the state of the industry for Wall Street, one analyst asked whether there were any concerns about the availability of uranium at these renewed higher prices. Gerald Grandey, chief executive officer of Cameco, the world's largest uranium producer, which accounts for 20 percent of world production from mines both in Canada and the United States, gave his outlook.
"We're very confident," he said. "I don't think the availability of uranium is much of an issue. The first wave of exploration in the 1960s and 1970s, we found in five years enough uranium to power the industry for 40 years. And for two decades, the price was way too low to encourage mine development." Over that time, the industry was able to live off reserves.
But now that prices are high again, "there are not just five companies but 400 out there looking for the next generation of deposits," Grandey said. "And those who have gone in early went back to the discoveries of the 1960s and 1970s—those will be the first to go into production over the next four to five years with major new discoveries. Uranium is a very common element in the Earth's crust, and with proper development, there will be more than enough uranium to power the industry for a long time."
Skip Bowman, the NEI's president, added that the cost of uranium—including the ore, the refining, and enrichment—was only one quarter of the production cost of nuclear energy, which he said the industry estimated at 1.68 cents per kilowatt hour. (That's not what anyone's paying for nuclear energy on a utility bill, by the way, but what the industry says it costs to produce.) "It's truly to the right of the decimal point," he said, adding that nuclear power plants operate on long-standing contracts for uranium supply, so they don't chase the ups and downs of the spot price.
For a less positive spin on the new uranium boom, here's the New York Times on what's happening at the Grand Canyon, and an Associated Press story on the new mining interest in Colorado ranch country.