Despite a sudden plunge in prices, the uranium exchange traded fund (ETF) may still be backed by solid fundamentals, with demand picking up and a dwindling fixed supply.
In Japan, 11 out of 54 nuclear reactors have been turned offline due to the earthquake and tsunami, writes Sean Bellamy McNulty for Seeking Alpha. Japan accounts for 12% of global uranium demand. McNulty remarks that Japan only makes up a fraction of the overall nuclear outlook and that the increasing demand for electricity will only result in the proliferation in nuclear technologies.
Credit Suisse calculates that 90% of growth in new reactor projects will come from China, Russia and India, which would help boost demand for uranium. The supply of uranium may dwindle in the future as new discoveries are quickly tailing off, notes MIT’s Thomas Neff. [All Eyes Are On Energy ETFs.]
The world uses around 67,000 tons of Uranium per year, and current usage would amount to 70 years of supply. Still, improving technology could provide more efficient means of extracting energy from a limited uranium supply. [Looking at Alternative Energy with ETFs]
Around 500,000 new shares have been recently added to the Global X Uranium (NYSEArca: URA) fund, reports Herbert Lash for Reuters. Bruno del Ama, chief executive of Global X Management Co, manager and adviser to the Global X ETF funds, commented that “there has to be a lot of people selling, but a lot of new people and new investors coming in.”
Consultants Eurasia Group said that China and India will probably not abandon their near-term nuclear projects, which should help support uranium prices.
For more information on uranium, visit our uranium category.
Max Chen contributed to this article.