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Hedge Fund Speculation, Future Nuclear Demand Drive Uranium Price Boom

April 9, 2007 (EIRNS)—The spot price for uranium hit $95 a pound on April 8, reaching its highest level since the 1970s, the Financial Times reported. The uranium price has risen 45% from three months ago, and 80% from the level six months ago. It was below $10 in 2002. Analysts are predicting $125 this year and $140 in 2008. The World Nuclear Association claims that restocking by utilities, speculation by hedge funds, and building for new reactors has put pressure on the market. It is the speculation by hedge funds, and their hoarding what they buy, that is driving up the price of uranium.

Investigation by EIR has revealed that hedge funds now account for 25% of the world trading in U-238 ore, and are a major cause for the price increase. World production of uranium ore has dropped slightly over the last 20 years, but this is not the cause of price rises. One-third of world nuclear fuel does not even depend upon mined uranium, but comes from reprocessed spent fuel, and the blend-down of weapons-grade material from bombs. In the U.S., fully half the nuclear fuel comes from Russian warheads. The price rises now, from speculation by hedge funds and hoarding of material, is not the result of increased demand, but anticipated increased demand over the next few years.

Over the next five years, a new generation of nuclear plants will start to come online in Russia, China, India, Europe, the U.S., and many "new" nuclear countries.

India Defense magazine on April 9 reported that India's commercial nuclear development will not wait for thorium reactors. Bhabha Atomic Research Center director, S.Banerjee, speaking to the reporters at Mumbai on April 10 said India has no choice but to push ahead with commercial heavy water reactors and will not wait for the commercial thorium reactors to come on line. As a result, India will have to double its uranium production in the coming days and exhaust whatever uranium reserves it has at this point in time. India does not enrich uranium but uses natural uranium, which consists of 99.3 percent of non-fissile uranium 238 with 0.7 percent fissile uranium-235 in its heavy water moderated reactors.

Banerjee told reporters that within the next two years, India will start construction of 12 reactors so that by 2012, India could add 10,000 MW of power capacity in its nuclear power generation sector. The plan includes beginning construction of eight 700 MW prssurized heavy water reactors (PHWRs)) and setting up one lightwater reactors and three fast breeders.

Of the three fast breeder, 2-500 MW reactors will be located at the Department of Atomic Energy's (DAE's) campus at Kalpakkam, Tamil Nadu, where the breeder reactor development has been done. The other one will be the Advanced Heavy Water Reactor (AHWR)— a 300MW thorium fast breeder reactor. Where this one will be located has not been said, but the work for the 300MW reactor has already begun, Banerjee noted.

Banerjee said the FBRs are being designed to have a life of 60 years, "but we want to ensure that it gives us power for the next 100 years."

Expanded uranium exploration, full-scale reprocessing, breeder reactors, and deployment of thorium technology will bridge the gap from fission to fusion (see related EIR article).