Despite bearish moves in the uranium spot price this year, Deutsche Bank's latest market report backs up bullish sentiments toward long-term investment in uranium stocks.
Supply/demand fundamentals in the short-term may lead to further dips in U308 spot and uranium stocks prices, but many factors are even now colluding to create a favourable imbalance between nuclear fuel demands and available supply.
Deutsche expects a supply surplus of 9.9 million pounds 2012 as the US government dumps UF6 stockpiles onto the market and mine production increases in uranium-rich regions like Kazakhstan.
With this in mind, Deutsche's price targets for some uranium stocks are lower than their current prices.
But, investors looking to make long-term uranium plays should view dips in uranium stock prices as buying opportunities because demand for nuclear fuel is projected to heat up all over the world as countries turn away from fossil fuel-based energy production.
Energy-hungry nations like China and India are committed to ramping up their nuclear energy capacities over the coming decades with India recently reporting it plans to increase its capacity from 4100MW to 40,000MW by 2020 and 63,000MW by 2032.
And Asia isn't the only region in the world turning to nuclear power to meet its increasing energy needs. European and Latin American nations are also considering either increasing existing nuclear capacity or establishing new nuclear programmes.
Even the oil-rich Middle East is anticipated to join the competition for nuclear power supplies. The United Arab Emirates is seeking to open its first nuclear reactor (and the first for the Gulf Arab region) in 2017.
The UAE's $40 billion nuclear programme is expected to "trigger a race among Gulf Arab states for limited atomic energy resources to meet surging electricity demand and free up more oil for export," says a recent Reuters report. Bahrain, Kuwait, Oman, Qatar and Saudi Arabia are also interested in nuclear power.
Although a supply surplus is expected over the net few years, the precarious nature of this market sector is exemplified in recent news that BHP Billiton's Olympic Dam underground mine in South Australia has suffered a huge setback due to a mechanical failure in the 800 meter deep Clark shaft's haulage system.
The Olympic Dam is Australia's largest underground mine and the Clark shaft is responsible for the vast majority of the ore brought to surface at the mine. The mine produced 194,000 tonnes of copper, 108,039 ounces of gold and 4,007 tonnes of uranium in 2008.
Sales of copper, gold and uranium worth about $150 million a month are expected to be lost until the shaft is up and running again, which could be as many as 6 months.
A second haulage system is in operation at the Whenan shaft, but it reportedly only has about 20 per cent of Clark's hauling capacity.
The mine is the largest uranium deposit in the world and the fourth largest copper lode. Analysts expect the accident will lead to increases in global copper and uranium prices, with uranium most affected. BHP or its regular customers would have to turn to the spot market as BHP has had to do in the past.