The big question on investors’ minds is whether Japan’s damaged reactors go into full meltdown or not. The ramifications for the prospects of uranium stocks and nuclear plant builders are huge. I’m in Cameco ($CCJ) right now which is the largest, highest quality uranium miner and is off 13% on today’s session as of this afternoon.
Regardless of my long-term bullishness for both uranium prices and its massive usage in China and India, this week’s events force me to reevaluate whether my thesis is still intact.
From the Wall Street Journal:
A moratorium on new reactors in the U.S. is unlikely, said Nick Carter, a uranium analyst with Ux Consulting Co. in Roswell, Ga. However, countries closer to earthquake zones may slow nuclear power development or halt it altogether, he said.
The effect on world-wide nuclear growth “will depend upon how things play out in Japan over the next few days or weeks,” Mr. Carter said. “If nothing happens other than radioactive steam releases, I don’t think that will be detrimental to anyone’s health. But if it worsens and you have a full core meltdown, that would certainly be catastrophic.”
Balancing these risks to a degree is this Barron’s piece from this weekend. In it, they’re anticipating some weakness in the Uranium story near-term while reiterating the case for bullishness over a longer horizon (which is kind of my thing):
RBC Capital Markets argues that the drivers pushing uranium higher are unchanged. In the past, Chinese utilities acquired uranium at licensed repositories in North America and Europe. But Beijing now wants uranium shipped directly to China. So Chinese utilities are selling stocks held in Western countries, but ultimately must replace them. “Over the longer term, we think there will remain upward pressure on the spot price, with some potential volatility along the way,” writes RBC. It expects spot prices to average $65 per pound this year, rising to $80 in 2013. Other factors are pointing to costlier uranium over time. India’s nuclear ambitions have become bolder since it signed a landmark pact with the U.S. in 2008, opening the way for it to import nuclear fuel. India wants to build 60 new reactors, 22 more than it had planned at the end of 2009.
The uranium names were down much more this morning, I have not added to any positions just yet. Whenever a major short-term hiccup threatens a long-term theme of mine, I err on the side of caution while reevaluating.