Nuclear energy to see rebirth in North America as concerns over greenhouse gases grow, finds new CIBC World Markets report
Uranium prices to hit US$160 per pound by end of 2008 TORONTO, April 17 /CNW/ - CIBC (CM: TSX; NYSE) - Concerns over greenhouse gas emissions from coal-fired electricity plants will see a rebirth of nuclear energy in North America and continue to drive the price of uranium to record highs, finds a new report by CIBC World Markets. CIBC World Markets' April Monthly Indicators report notes that environmental opposition has already forced TXU, the largest utility in Texas, to scrap some 6,000 megawatts of planned new coal-fired capacity in favour of building as many as five new nuclear facilities. Aside from refurbished plants in Ontario, they will be the first new nuclear stations started in North America in over 25 years. "If you can't get coal-fired generating capacity licensed in Texas these days, where can you get coal plants built?" notes Jeff Rubin, Chief Economist and Chief Strategist at CIBC World Markets. "Coal-fired utilities find themselves the primary target of a tidal wave of greenhouse gas (GHG) legislation that is sweeping across state legislatures. Weaning American power consumers off cheap and abundant domestic coal supply is rapidly shaping up to be the frontline battleground of the carbon wars in North America." The report notes that nuclear power accounts for only 16 per cent of global power generation today but that it has a huge upside in a carbon- constrained world. Unlike other green power alternatives like wind and solar, nuclear facilities provide efficient and reliable base load power at an increasingly competitive price to coal once the costs of carbon emission are factored in. While only in the initial stages of rebirth in North America, nuclear power is already riding an expansionary wave from explosive power demand growth in Asia where 21 new reactors will come into service by the end of the decade and twice that many slated for operation by the end of the next decade. With this rapid growth, Mr. Rubin states that finding enough uranium to power all those reactors is already becoming an issue. "Prices have more than doubled over the last six months and with utilities still needing to contract roughly a third of their uranium fuel requirements over the next five years, more and more are scrambling to lock in supplies." As a result, he predicts uranium oxide prices will hit US$140 per pound this year and US$160 per pound by late 2008 - more than triple the price of uranium last fall. The report also notes that uranium mines will only be able to supply little more than 60 per cent of global demand until at least the end of the decade, and possibly longer depending on when new production begins at the Cigar Lake mine in Saskatchewan and the Olympic Dam mine in Australia. Secondary supply sources, such as inventories held by utilities, mines, other fuel cycle companies and governments; reprocessed reactor fuels; diluted enriched materials from military programs; and the contents of depleted uranium stockpiles, will have to supply the balance. The report notes that secondary sources have played an important role in recent years, supplying as much as half of the fuel needs of U.S. reactors. However, these sources are ultimately finite and likely to decline, potentially quite rapidly, in coming years. The full CIBC World Markets Monthly Indicators report is available at http://research.cibcwm.com/economic_public/download/miapr07.pdf. CIBC World Markets is the wholesale and corporate banking arm of CIBC, providing a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.