Uranium ore prices peaked at $136/pound in July 2007 and have fallen nearly 70% since then to $41.75/pound. The drop came as new mines were developed in response to anticipated growth in the nuclear power generation industry as the world tries to reduce carbon dioxide emissions. With a couple of exceptions, the new demand did not develop as quickly and as strongly as expected, and the price for uranium fell.

That situation may be about to change as China, especially, and India grow their stockpiles of uranium in anticipation of a nuclear plant building boom. Miners such as Canada’s Cameco Corp. (NYSE: CCJ) and Australia’s Paladin Energy Ltd. (OTC: PALAF) and Energy Resources OF (OTC:ERASF) stand to benefit from the new stockpiling. Reactor builders like France’s Areva CIP (OTC: ARVCY) and General Electric Co. (NYSE: GE) should also get a boost. US uranium enrichment firm USEC Inc. (NYSE: USU) might also see a rise, though for a different reason.

China is expected to import 5,000 metric tons of uranium in 2010, and as much as 20,000 metric tons in 2020. China plans to boost nuclear generation capacity to 85,000 megawatts, from its current capacity of about 9,500 megawatts. India, which currently takes less than 1,000 metric tons will need to boost its imports to about 8,000 metric tons to meet its planned capacity expansion from 5,000 megawatts to 20,000 megawatts.

As both countries, particularly China, continue to stockpile uranium, the supply overhang will disappear and prices are expected to rise to the mid-$50/pound range next year and to $60/pound in five years. That’s still a far cry from the record levels of 2007, but if extraction costs, currently estimated at $31/pound, can be held down, these price increases will boost miners’ profits quite nicely.

And, of course, nuclear plant builders like Areva, GE, and Westinghouse, now a division of Toshiba, should see nice increases to their own revenues and profits. Areva, which is a vertically integrated nuclear company that owns mines, recycling plants, and everything in between, should do particularly well. The French company does more nuclear business in the US than any other company even though not a single US reactor was built on an Areva design.

USEC, the only company enriching uranium in the US, benefited earlier this year from a US Supreme Court decision that stalls the importation into the US of low-enriched uranium. The decision effectively continued USEC’s monopoly position in the US. The company’s share price has improved more than 35% since the beginning of the year. A second US enrichment plant owned by another European company opened in New Mexico last month.

The anticipated rise in uranium demand in the US is a result of the federal government’s loan guarantee programs initiated during the Bush administration and tripled by the Obama administration to a total of more than $54 billion. At least some of those guarantees are going into competitive enrichment plants in the US.

But what’s happening in the US is a sideshow compared with the plans afoot in China, where 20 nuclear plants are under construction, 36 more are in the planning phase, and 157 more are being proposed. By 2020, China is expected to have 60 nuclear plants in operation, compared with just 11 today.

Production at existing uranium mines is peaking just as demand is growing. Some observers think that speculative interest in new mines could drive the miners share prices to a $60-$80/pound range pretty quickly. Whether or not that happens, virtually all things uranium are pointing to improved revenues and profits.

Paul Ausick

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