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Commodity Trading - Trading Uranium

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By : Amar Mahallati    99 or more times read
Submitted 2012-11-03 21:08:51
Uranium offers traders a little bit of walking on the wild side. It is a volatile commodity, but worth the risk if you can afford it. A few years ago, Uranium prices exploded, then dropped to $29 just as quickly, then it skyrocketed back up, hitting $45. This volatility makes oil prices look like a walk in the park, but in recent years, uranium prices have been on a steady rise.

Uranium has many natural advantages over oil or other energy sources. Fuel that is produced from uranium lasts for decades and can be recycled in the form of plutonium which extends it life for even more decades. This, however, can present a problem because of its extensive life, disposing of uranium is a political caveat.

Nuclear power supersedes oil and chemical refineries in safety. The safety record of nuclear power far exceeds other large scale energy generation technologies. Oil and chemical refineries can and have exploded due to human error, accident and incompetence. Regulations and controls regarding the use of nuclear fuel are much more stringent and adherence is more strongly enforced that with conventional fuels.

Nuclear power is a politically charged, controversial topic. One camp has it labeled as dangerous and even evil. The other camp, though, purports that nuclear power safely generates 16% of the world's electricity. Countries such as France and Japan have relied heavily on nuclear power for many years and neither country holds any regrets for electing to use it as their major power source. 78% of France's electricity comes from nuclear power and, most notably, has never experienced a serious incident.

Asia is experiencing exponential growth in the area of power plants being built, but this is also occurring worldwide. China is working on an $8 billion contract to build four new plants and will be constructing 27 by the year 2020. India plans to build 17 plants by the world 2012 which will triple their existing capacity. Russia has reduced its exports so that it can retain fuel for the 25 new plants that are planned by 2020.

The majority of these plants have yet to secure a long term supply which indicates that they will have to pay market prices as they near completion.

There even seems to be some changes for the United States on the political horizon a one time adversaries are finding common ground and passing the peace pipe, so to speak. Environmentalists are beginning to see the light and grasp the concept that nuclear power offers one of the best alternatives to continued fossil fuel use, particularly as concerns over global warming increase. Also, as oil prices continue to rise, the political powers that be seem to be swaying more in favor of nuclear power.

While demand continues to rise, supplies remain tight. Commercial stockpiles fell 50% from 1985 to 2003 and mining remains expensive and difficult.

The Australian mining company, Cameco, is one of the largest uranium suppliers in the world. It plans to expand its production by 18$ in Canada's MacArthur River mine which is currently the largest in the world.

Although supplies are not expected to expand enough to rise to the growing demand to a point that would suppress the price, it is still a viable option. Several analysts expect that supplies will remain tight over the next decade. This will result in a rise of prices to a level that has not been seen since their peaks in the 1970s. These prices are expected to remain high for quite some time.

Demand runs annually at about 170 million pounds while the supply is roughly 75 million pounds a year. The deficit is made up by supplies that are stockpiled from the 1970s, the dismantling of Russian nuclear warheads and other sources. That supply, however, is dwindling.

Fuel costs are relatively small expenditures for power plants, but fuel it vital to their operation. Because there is no substitute, they can not afford to run out.

These various factors are exceptionally appealing to metals traders who may be interested in uranium. Unlike other metals, uranium does not trade on the open market. Contracts are made privately. However, investors who are interested can purchase mining stocks, futures contracts, options and other securities just like any other investment. A broker can provide advice and direction on this trading maneuver.
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