Uranium demand will continue to grow

20 Jun 2011 by Jim Fickett.

A new analysis suggests that, although Fukushima will cause a pullback in nuclear power in Germany and Japan, overall world demand will continue to grow at close to the rate projected before the disaster.

There have been many fragmentary reports about nuclear plans in various countries, but I have been waiting for a serious, global analysis. Now the Economist Intelligence Unit has released a report with such an analysis, entitled The future of nuclear energy: One step back, two steps forward (free registration required).

The EIU have researched the top ten nuclear power-producing countries and made detailed forecasts of how power capacity will grow through 2020. Here is their forecast (in gigawatts):

Net nuclear capacity, GWe
                2010 	2015 	2020
USA 	        101.1  	103.4  	109.0 
France 	        63.3  	64.8  	66.4 
Japan 	        46.8  	45.0  	44.7 
Russia 	        22.7  	29.7  	41.0 
Germany 	20.5  	11.7  	9.0 
South Korea 	18.7  	24.2  	28.1 
Ukraine 	13.1  	13.1  	16.2 
Canada 	        12.6  	12.6  	15.0 
UK 	        11.0  	9.6  	12.7 
China 	        10.1  	37.1  	63.1 
Top ten users   319.8  	351.2  	405.2 

Source: Economist Intelligence Unit

This forecast shows growth of 27% from 2010 to 2020, in these 10 countries. That is probably on the low side for global growth, since it includes the two countries that plan to reduce nuclear power, and not many smaller economies (most notably, India) that plan to start or increase nuclear power.

Before the disaster in Japan, the best available projection for global growth in nuclear power was from the so called Red Book, published last summer (purchase required). The Red Book gave a low-growth scenario, which showed an 18% increase in capacity from 2010 to 2020, and a high-growth scenario, with a 36% increase.

So the current, 27% increase from the EIU falls precisely in the middle of the pre-disaster forecasts from the Red Book. This suggests that the large drop in the price of uranium stocks is due more to alarm over current headlines, and not to the realities of the uranium market. That situation could continue for some time, as exaggerated negative stories continue to dribble out. Eventually, however, Fukushima will be cleaned up and will drop out of the headlines, and investors will focus once again on supply and demand.