Of all the alternative energies in the world, nuclear power is both the most promising and the most reviled.
Many environmental activists now see nuclear as the least-worst' option for dealing with climate change. Compared to coal and even natural gas, nuclear is clean energy.
On the other hand, the 2011 Fukushima disaster in Japan illustrated all anyone needs to know about why nuclear is held with such suspicion by the voting public. And where the voters go, politicians follow.
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As a result, the price of uranium the fuel for nuclear reactors is hovering very near to its post-financial crisis lows.
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And that's why now could be the perfect time to add some nuclear industry exposure to your portfolio
Supply of uranium looks set to tighten
In 2007, the price of uranium spiked above $130 per pound. The financial crisis saw it crash to around $40 per pound. It then clawed its way back above $100 as recently as early 2011. The Fukushima disaster drove it back below $50, and it has been in a slow decline since.
Right now, the price is sitting at just over $42 per pound. What's to stop it from going even lower?
There are tentative signs that the price might be bottoming out. Uranium industry group Ux Consulting notes that the uranium price has remained stable at $42.25 per pound for five weeks in a row. That's the longest period of unchanged prices since the summer of 2008, according to Platts.
As Melissa Pistilli notes on uraniuminvestingnews.com, the stable price may "lure utilities back into the market this month despite the fact that April is seasonally slow."
They might be wise to do so. We all know what happens when prices of commodities fall. Production tends to fall too. Various plans for new mines and production expansions have been shelved.
Meanwhile, global uranium consumption looks set to outstrip production this year. The shortfall is met by stockpiles from Russia, from decommissioned nuclear weapons. This has provided around 25 million pounds of uranium a year since 1993, according to Halkin Services.
However, the deal between the US and Russia on the stockpiles expires this year. While it might be renegotiated, the Russians may well look for better terms.
What about the demand side?
Worldwide, there are around 435 nuclear reactors in operation, with more than 60 being built. Nearly half of the new reactors are in China. One of China's biggest problems right now is pollution. Between the smog and the dead animal-clogged rivers, the state of the environment and living conditions is a serious social issue.
This is where nuclear power has a real benefit. China only gets around 2% of its electricity from nuclear just now. The majority comes from coal, which is dirty and accounts for a lot of the pollution problem. So if China wants to be more green', then nuclear makes a lot of sense there are plenty of problems associated with nuclear, but greenhouse gas emissions are not one of them.
The other area to keep an eye on is Japan itself. Before the disaster in 2011, nearly a third of Japan's electricity came from nuclear power. Yet now almost all of its reactors have been shut down.
That means the country is relying on expensive imported natural gas. Japan's Ministry of Economy, Trade and Industry thinks the nuclear shutdown is costing the utility companies around $13bn a year.
Unsurprisingly, Japanese voters don't like the idea of nuclear power. But given the huge costs involved, you can see that politicians might be tempted to push through the reopening of as many reactors as possible. Prime Minister Shinzo Abe is certainly keen the last thing he wants after making such an effort to reflate the economy is for his hard work to be undone by an energy crisis.
New safety standards are being revealed in July, notes Pistilli, and some reactors look set to be restarted in the autumn. If Japan switches on more reactors than expected, that could give a surprise boost to demand.
The reality is that despite Fukushima, nuclear power isn't going to go away. Yes, it's likely to remain a marginal source of energy because it will never be politically popular. But given how far the uranium price has fallen, now looks a promising time to add a bit of exposure to the sector to your energy portfolio.
Probably the easiest way to bet on a nuclear comeback is via New York and Canada-listed Cameco (NYSE: CCJ; TSX: CCO). The uranium miner has seen its share price fallby half over the past two years, along with the uranium price.
One of its biggest prospects is the much-delayed Cigar Lake mine in Canada. The mine is the world's second-largest high-grade uranium deposit. It should have been in production back in 2007, but flooding has pushed the schedule back substantially production is now expected to start in the middle of this year.
But the main driver of Cameco's share price is really the price of uranium, which makes it a decent way to play any pick-up.
Don't expect the price to come rocketing back there are plenty of potential disappointments and tripwires on the road to a nuclear renaissance. But given the current lack of interest in the sector, and the low price of uranium, it wouldn't take much positive news to start turning things around.
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This article is taken from the free investment email Money Morning. Sign up to Money Morning here .
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