Uranium Trading
Uranium Trading: China’s $300 Billion Conspiracy to Stockpile U308
A Taipan Publishing Group Strategy Report
by Irwin Greenstein, Senior Research Analyst, Taipan Publishing Group
What you’re about to read sounds like a Robert Ludlam novel: stealth Chinese traders, underground uranium auctions, and devastating mine floods.But this is no mystery potboiler. It’s market intelligence shining a light on the shadowy world of uranium 308 (aka U308).
While U308 is lumped in with gold, oil and copper as a commodity, there’s one critical difference: Unlike gold, oil or copper, there’s no regulated trading exchange for U308. You can’t buy an ETF for it. U308 moves in a near-underground economy of secretive auctions where uranium trading is fast and furious.
Uranium Trading: Why U308 Prices Will Climb
And that’s why U308 prices will continue to climb.
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The absence of a regulated trading exchange gives an enormous advantage to a stealth team of Chinese traders instructed by the government to track down every last pound of U308.
Will this covert team of traders ultimately succeed? Personally, I would not bet against them.
This crackerjack team is headed by a cabinet-level rising star who is chauffeured around Beijing in a big, black Audi. He sports a cigarette holder like FDR and is considered one of China’s top economists.Uranium Trading: A War Chest for U308
Under his brilliant supervision, the Chinese uranium traders will draw on a war chest of $300 billion in U.S dollars. That amount is nearly twice the size of the world’s largest mutual fund. It’s about six times bigger than the legendary Magellan Fund. And it’s bigger than the world’s top four mutual funds combined.
Even if the Chinese traders only partially succeed, their move on the U308 market will eventually drive up prices to historic highs.
The Chinese uranium traders are operating in one of the tightest markets in recent memory
Uranium Trading: 17% of U308 Is Under Water
As they race to corner the market on U308, a flood wiped out one of the biggest uranium mines in the world. Called Cigar Lake, this mine was scheduled to supply 17% of the world’s U308.
Cigar Lake could be out of commission for the next two years. The shortage has already been priced into the market for spot U308 prices. But the price still goes up.
The current spot price for U308 is around $90/lb, up from the 2007 low of $75/lb and down from the 2007 high of $138/lb.
So U308 prices have stabilized somewhat, but persist in moving up.
How high U308 will go is anybody’s guess right now. But it will go up.
And with prices now flat, there is no better time to buy U308.
The demand for uranium is expected to increase by 2.8% through 2010 and double by 2020. Like it or not, nuke energy is back in vogue. Compared with oil, the price is relatively cheap and stable. And the green community has a made a full 360, now endorsing nuclear energy as a viable emissions-free source.
A Chronic Shortage of U308 Uranium for Trading
Cameco, the owner of Cigar Lake, said that world supply would have to increase by 52% in 2025 to keep pace with demand.
And thanks to the Chinese, that demand will grow, making U308 a promising long-term play.
Over the next 15 years, China plans on building 30 new nuclear reactors. Without those critical reactors, the country’s environment and economy could be heading straight for the dumpster.
Uranium Trading: The Black Plague of Coal
China’s nuclear-energy mandate is all about getting out of coal and into clean energy like nuclear power -- the power derived from uranium 308.
It’s not that China suddenly gives a hoot about endangered species; Beijing’s reasons for going green (that is, nuclear) are strictly financial.
It’s just getting too darn costly for China to keep chugging away on fossil fuels.
China is the No. 1 coal producer and consumer in the world. Close to 70% of its energy is derived from the fossilized
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carbon that feeds blast furnaces, boilers and power stations.
China consumes more coal than the U.S., Europe and Japan combined. Every 10 days, China lights up another coal-fired power plant. Some of these plants are huge, big enough to serve every household in Dallas.
Uranium Trading: A Noxious Nightmare
At 2 billion tons per year, China’s coal consumption has turned the country into an environmental slag heap. By the year 2025, China’s coal emissions are expected to spread more noxious carbon and sulfur dioxide than the U.S, Japan and Canada combined.
Two-thirds of the world’s most polluted cities are in China. Sulfur-dioxide emissions from coal-burning power stations hit 25.5 million tons -- a 27% increase from 2000. That makes China the No. 1 sulfur-dioxide polluter in the world.
China’s airborne sulfur dioxide has even been found in beautiful Lake Tahoe, Calif.
China simply can’t afford to keep up its coal-fired plants. So China is stuck with coal, but at an awful price.
Uranium Trading: China’s Pollution Riots
The cost of coal-related pollution to China’s economic growth is pegged at 3.1% of the total GDP -- or $64 billion. That’s a huge number.
The situation is China is so bad that “pollution riots” are breaking out all over the country.
On April 8, 2006, villagers armed with iron bars attacked factories polluting their water. Pollution riots in Huashui in April 2005 pitted outraged citizens against 10,000 police officers. And in mid-July 2005, some 15,000 protestors amassed in at the gates of an offending factory, throwing stones and overturning police cars, despite the thick clouds of tear gas.
Pollution riots increased 30% in 2005 over the previous year. The Chinese people are taking to the streets to demand an end to the pollution that is robbing them of their livelihoods and health.
Uranium Trading: Desperate for U308
And that’s where the stealth Chinese traders come in. They’re desperate to get their hands on every pound of U308 they can buy. The stakes are enormous.
China has no alternative. It must make a full-court press on U308 at any price.
With all the hoopla you hear about China’s “economic miracle,” the country is starving for electricity. China desperately needs another 23,000 megawatts to maintain its nonstop growth.
And 23,000 megawatts is a massive amount of electricity. It’s how much New York City lost during the great blackout of 2003, when 19 million New Yorkers were plunged into darkness and the city was dead in the water.
Uranium Trading: 345 Companies Grind to Halt
China’s power shortage forced Shanghai Volkswagen to stop work for several days at a time.
Sony’s Chinese manufacturing plant had to cut production due to chronic power shortages.
Chengdu City suffered the worst power shortage ever, with 345 companies stopping production.
The China unit of Marubeni Corp, Japan's fifth-largest trading company, stopped work two to three times a week due to blackouts.
General Motors and Panasonic shifted production to off-peak hours, losing days of work.
Thousands of Chinese companies shut down as power is diverted to foreign firms. Energy hogs, such as the cement and steel industries, nearly bring power plants to their knees in China's rapidly developing eastern and southern regions.
Uranium Trading: Earthquake Hits Uranium Mine
That’s why China is committed to shelling out $50 billion on 30 nuclear power plants. The country must make the leap from 8.7 million kilowatts today to 40 million kilowatts by 2020. It’s the most ambitious nuclear power expansion in history.
And just when China is scheming behind the scenes to form this stealth group of traders, the Cigar Lake mine disaster hits -- and it’s bad.
The mine is 100 stories underground. Not a good place to be when an earthquake hits. Water poured into the shaft. Miners scrambled to lock the watertight bulkhead doors. But when the doors failed, the miners ran for their lives.
The world’s biggest undeveloped source for high-grade uranium is now completely under water.
Losing the Cigar Lake mine for uranium was like the world losing Saudi Arabia for oil.
Not good news for the Chinese U308 stealth traders… but it could be great news for you.
When this opportunity hits the news, it could be too late to reap the earliest and biggest gains that come with a first-move advantage. Our analysts here at Taipan Daily have reported from Russia, Thailand, Albania, Peru, and many other investment hot spots overlooked by Wall Street. They can show you how to turn “crisis” situations like these into lasting wealth. Get in on these opportunities now. Sign up for your FREE Taipan Daily e-letter and receive the bonus Chart of the Day alerts. |
Originally published January 29 , 2008.
More Articles from Irwin Greenstein of Taipan Publishing Group
The Best IPOs in China: How an IPO in China can make you rich in New York
Investing in Precious Metals: 5 Smart reasons to dump gold now
Best Oil Plays in 2008: Bedlam in Pakistan and the young tigers of oil
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Investing in Uranium
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