Demand for Uranium in Australia-Free-Samples-Myassignmenthelp

Question: Discuss about the Demand and Supply for Uranium. Answer: Introduction Currently, there is an immense amount of hue and cry with regards to global warming and hence the global focus is on generation of clean energy which would not only fuel the future economic growth but would also address the issue of environmental pollution. One of the solutions in this regard relates to the use of uranium for generating nuclear energy which does not result in greenhouse emissions. Considering Australian exports of uranium, it is one of the critical resources that the nation has. However, in the last two to three years, the price of uranium has plummeted which has caused havoc for the uranium mining industry (Green, 2016). The objective of the given report is to analyse the recent fall in uranium prices with reference to economic theory and the potential outlook for future in uranium prices. Discussion In accordance with the theory of demand and supply, the equilibrium price of an underlying product or commodity is determined by the relative demand supply forces and the demand supply gap that tends to exist. These forces are particularly critical for commodities as there are market driven prices for various grades of the underlying mineral. Considering the demand supply situation, the price of these commodities tends to vary in real time and thus impacts the dynamics of the mining industry (Mankiw, 2014). There has been a severe fall in the uranium prices which have reached a 13 year low in 2014. The key factor responsible for the same is the Fukushima disaster which raised question marks over the underlying safety of nuclear energy. The sentiments were severely dampened when one of the technologically advanced nations such as Japan had to suffer a meltdown. As a result, a negative propaganda has begun which has led to the termination of existing nuclear plants and delay with regards to construction of new ones. A case in point is Japan which after this indicated closed down all the 48 operational nuclear reactors (FOE, 2013). The developed countries were quick to take a decision in regards to nuclear plants phase out in the favour of renewable sources of energy which is particularly true for European countries particularly Netherlands and Germany. Prior to this incident, these nations had sizable generation of electricity in the form of nuclear power, but migration from nuclear energy meant fall in demand of uranium by these nations. In the developing world, there are safety concerns which has given rise to protests which has stalled the construction of new nuclear plants which would adversely impact future demand (Green, 2014). The lower demand for uranium has led to lower price as has been explained through the diagram indicated below. On account of the shutdown of the nuclear plants, the uranium demand has fallen down which is graphically represented above by a left shift in the demand curve as illustrated. The supply in the short term does not change and hence there is a decrease in the price and quantity which is clearly illustrated above (Nicholson and Snyder, 2011). The impact of falling uranium prices is also evident on supply whereby there has been considerable erosion of the profitability of the uranium miners and additionally in view of the oversupply currently in the market, the various uranium mining projects have been postponed till the excess supply is absorbed. There are some small mining companies which have become bankrupt and others are facing bankruptcy in wake of the continued weakness in uranium pricing. However, even though some of the small players would exit, there is unlikely to a major decline in the supply of uranium which would imply that in the short term prices would continue to be soft (FOE, 2013). Even though Japan after the initial closure of all nuclear plants has went ahead to open two of them but it has done little to elevate the sentiments of the people with regards to nuclear energy. In practical terms, the opening of nuclear plants in Japan do not add to the demand considering the huge pile of stocks that it has which is expected to last for years (Cormack, 2014). Additionally, with regards to the other developed countries especially those based in Europe has abundant supply of renewable energy which makes it likely that they would not shift to nuclear energy in the future. Also, the humungous nuclear liability is also a concern for western nations due to which there is a tepid response to nuclear plants in the west. Thus, it is quite apparent that with regards to uranium demand the picture seems quite bad with regards to developed nations and potentially only the developing world could prove to e beacon of hope for the uranium miners (McHugh, 2016). The developing nations such as China and India have severe power shortages and hence are actively looking at nuclear power to serve the ever growing energy needs. Considering China and the mode of operations, it is highly likely that state owned Chinese mining companies may buyout uranium mines abroad preferably in Africa so as to ensure energy security. However, some demand would still be continued to be met by imports where Australian manufacturers could pinch in (Green, 2014). India on the other hand is likely to depend more on imports and hence provide a medium to long term opportunity for the Australian uranium miners (McHugh, 2016). However, the technological advancements particularly in the form of breeder reactors also need to be considered which tend to be highly fuel efficient and hence acts as a dampener for future uranium demand. Thus, it is likely in view of the above factors that uranium demand would pick up only in the medium to long term (Levit, 2016). Conclusion It is apparent that the demand for uranium has plummeted on account of safety concerns. The developed world seems to have permanently migrated from nuclear plants and it is likely that the future demand would come primarily from developing countries. However, considering the gestation period in construction, negative public opinion and the technological advancements going forward, it is highly likely that the price of uranium would improve only in the medium to long ter References Cormack. L. (2014), Uranium jumps as Japan reopens reactors, Retrieved on August 22, 2017 from https://www.afr.com/markets/commodities/uranium-jumps-as-japan-reopens-reactors-20141112-11l8li FOE (2013), Uranium price slumps, Paladin Energy in trouble, Retrieved on August 22, 2017 from https://www.foe.org.au/uranium-price-slumps-paladin-energy-trouble Green, J. (2014), Uranium how low can it go?, Retrieved on August 22, 2017 from https://www.businessspectator.com.au/article/2014/5/29/energy-markets/uranium-%E2%88%92-how-low-can-it-go Green, J. (2016), Australias uranium industry foundering ?nearlydead, i Retrieved on August 22, 2017 from https://nuclearinformation.wordpress.com/2016/06/12/australias-uranium-industry-foundering-nearly-dead/comment-page-1/ Levit, D. (2016), Uranium Prices Recovery Could Take 10 Years, Retrieved on August 22, 2017 from https://www.economiccalendar.com/2016/05/13/uranium-prices-recovery-could-take-10-years/ Mankiw, G. (2014), Microeconomics (6th edition), London: Worth Publishers McHugh, B. (2016), Uranium price increase around corner as China and India look to nuclear to reduce carbon emissions, Retrieved on August 22, 2017 from https://www.abc.net.au/news/2016-03-09/uranium-future-price-set-to-improve-as-new-plants-built/7232944 Nicholson, W. and Snyder, C. (2011), Fundamentals of Microeconomics (11th ed.), New York: Cengage Learning