Tuesday, March 15, 2011
Japan's nuclear power plant situation is going from bad to catastrophic...
Last week's massive earthquake and resulting tsunami shut down 11 of Japan's 53 nuclear power plants. It gets worse... Three of the most damaged plants lost their ability to cool the uranium fuel rods. When we can't cool the fuel, we can't control the nuclear reaction, resulting in a meltdown.
The New York Times is calling it the worst nuclear accident since the Chernobyl disaster in 1986. That event drove the price of uranium down 57%.
All the bad news this time has sent uranium prices plummeting. The uranium proxy I watch is down 25%. But no matter what happens in Japan, nuclear energy is not going away.
As longtime Growth Stock Wire readers know, I'm an energy bull...
The world needs much more electricity than it can produce right now. Western countries consume around 7,000 kilowatt hours per person per year. For China and Brazil, that number is only 2,250. For India, it's only 500.
Yet Brazil, China, and India get more wealthy every day. They want to stream movies over the Internet, too, and everything else that comes with a wealthier lifestyle. That means the electrical power supply must grow.
The only solution requires nuclear power as part of the mix.
China, which plans to build 60 new power plants over the next decade, isn't going to stop because of what happened in Japan... neither will India, which has 40 new reactors on the books over the next 20 years. Both these countries need electricity desperately, and nuclear power is a big part of that plan.
That notwithstanding, the rout is on in the uranium sector. The juniors I've been talking about in Growth Stock Wire fell between 10% and 35%. Cameco, the ExxonMobil of uranium miners, dropped 13% on Monday. It'll likely open even lower today.
Here's the thing: Japan's 56 nuclear reactors consume nearly 8,000 tons of uranium per year. If 11 are offline, 1,570 tons will go unused this year. That's about 2% of the world's consumption. Hardly enough to flood the market.
Existing power plants all over the world still need uranium. Soon-to-be-built power plants in China and India will need uranium, too.
I don't see this as a reversal of the big energy trend.
But what should you do now if you already own uranium stocks? Above all, mind your trailing stops. While I think we're close to the lows in uranium stocks, and most of the selling is driven by panic instead of the long-term fundamentals, we can't know the future. Don't "hold and hope."
Instead, be ready to get back in once the market bottoms and a little clarity emerges regarding exactly what Japan is facing... This could become the single best opportunity to buy uranium stocks. When the dust clears, we'll still need energy... And we'll still need uranium.
"I can't overemphasize the importance of uranium," Matt says. "The emerging world's demands for energy are only going higher... and uranium is one of the most concentrated fuels we have."