Uranium prices are expected to outperform other commodities in 2016 and beyond as a global climate change deal and growing demand from Asia bolster the prospects of the nuclear industry. The metal that powers nuclear reactors has been gradually recovering from a sharp decline in the wake of Japan's Fukushima disaster in 2011, and has gained this year as several other commodities slumped due to oversupply and concerns about Chinese economic growth and US monetary tightening.
It is expected to climb further, according to analysts, after governments forged a landmark agreement to reduce green gas emissions at a global climate summit in Paris last month - a move that supports nuclear power generation and in turn uranium. Nuclear power stations currently provide around 11 percent of the world's electricity but the share is likely to increase as China and India expand their capabilities.
China - seeking to reduce its dependence on polluting coal - plans to build six to eight nuclear power plants a year for the next five years, and India aims to generate 25 percent of its electricity from nuclear by 2050, up from 4 percent in 2013. Meanwhile Japan is restarting four reactors, which may accelerate the country's return to atomic energy.
"The China boom is only now happening and while 'nuclear' might still be a toxic word, nuclear power generation is recovering towards pre-Fukushima levels," said Macquarie analyst Stefan Ljubisavljevic. "It might not be popular, but it does provide the clean and consistent base-load power generation that many nations are seeking." Prospects of higher demand and strategic stockpiling from US utilities sent spot prices to an average of $39 a pound in 2015, up 18 percent from $33 last year, making it the best-performing metal of the year and one of the few commodities to post a yearly increase.
Crude oil, the most traded commodity by far, lost 35 percent of its value this year, while benchmark base metal copper fell 26 percent and gold dropped 9.4 percent. Cocoa bucked the trend, with a 12-percent rise. Kazakhstan, the world's biggest uranium producer, has just signed co-operation agreements with Chinese companies to build a nuclear fuel plant in the central Asian country, while Canada's Cameco, the world's largest listed uranium mining company, signed a five-year deal in April to supply fuel to Indian nuclear reactors.
BofA-ML analyst Oscar Cabrera said he expected uranium prices to continue to advance after 2018, thanks to the increasing demand from emerging markets China and India. Uranium prices plunged after a major earthquake and tsunami in Japan disabled the power supply of three Fukushima reactors, causing a meltdown and the release of radioactive material in March 2011. From around $60 before the disaster, they hit a nine-year low of $28 in 2014.