Present demand for uranium is outstripping supply - about a third of annual demand for uranium was met by declining inventories and Russia’s highly-enriched uranium weapons de-commissioning.
There has been little exploration for 25 years and no new mines built outside Canada for the last 20 years.
There is not enough uranium capacity to satisfy existing plants - crucially, new uranium deposits need to be put into production now.
Global electricity demand is growing rapidly. Even with effective energy efficiency programmes in developed countries the International Energy Agency expects global electricity consumption to double by 2030.
Currently 17% of world electricity is generated through uranium
Background
Demand for uranium fell sharply in the 1980s hit by a combination of environmental and economic factors. The combination of the 1986 disaster at Chernobyl, combined with low oil prices and the shaky economics of some state-run nuclear facilities damaged the rationale of investing in new nuclear reactors and consequently new uranium mines.
But with world net electricity consumption expected to nearly double over the next two decades (International Energy Outlook 2004), some 30 new nuclear reactors are being built with expansion fastest in developing Asia, including China and India.
India, where nuclear power accounts for 2.8 per cent of electricity production, has nine reactors under construction. It wants to boost the amount of electricity generated by nuclear plants by 100 times by the middle of the century.
China has opened six reactors since 2002. Two more are under construction and China's aim is to increase its nuclear capacity fivefold by 2020, potentially equivalent to building up to 40 reactors in the next 15 years.
Part of the rise in interest in nuclear is that in an environmentally conscious age nuclear plants are once again seen as clean energy. They emit a tiny fraction of the carbon dioxide produced by burning fossil fuels such as oil, coal or gas and are crucial if countries are to meet the carbon dioxide emissions targets set out in the Kyoto protocol.
Demand outstrips supply
Production from world uranium mines are now estimated to supply only 55% of the requirements of power companies
The shortfall is supplemented by ex-military grade uranium but this supply is finite, is declining or being held back.
Consequently world mine production will need to expand significantly post 2005.
In 2003 it was estimated that some 440 reactors worldwide required 77,000 tonnes of uranium oxide concentrate containing 66,000 tonnes of uranium each year.
By contrast mines in 2003 supplied some 42,300 tonnes of uranium oxide concentrate (U3O8) containing almost 36,000 tU - considerably far less than the power utilities' annual requirements.
The balance was made up from secondary sources or stockpiled uranium held by power companies, but these stockpiles are now largely depleted.
This supply shortfall has had an impact on the uranium market. By the end of the 1990s when the market was in decline, uranium prices had fallen to under $8 per pound. By Autumn 2005 they had quadrupled to $33 per pound.
Market observers believe that there is a reasonable scenario to be made for uranium prices to achieve a long-term average of $55 per pound.
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