Commodities | Mar 18 2014
By Greg Peel
Last week saw the third anniversary of the Fukushima nuclear disaster which turned the global uranium market upside down. Prior to the disaster, the spot uranium price had spent 2010 rallying from a post-GFC low around US$40/lb to over US$70/lb as the world looked increasingly toward a nuclear future, led by China. The disaster saw the price fall quickly to US$50/lb as Japan shut down its 48 reactors on safety concerns.
With Japan reliant on nuclear energy for 30% of its electricity generation, it was assumed the country’s reactors would not be shut down for terribly long, but rising popular protest against the dangers of nuclear energy complicated the matter. While protest remains vigilant, the cost of replacement fossil fuels, particularly natural gas, for electricity generation has blown out Japan’s trade balance at a time the new government is attempting to reignite the country’s export economy. Add in the additional cost to households, and the Japanese people have begun to relent.
Shinzo Abe has stated he intends to release a “realistic and balanced” energy strategy this spring, likely at the end of March. The government hopes to restart ten of Japan’s reactors by December to cope with the seasonal summer surge in energy demand.
The global uranium market has waited three years for the first Japanese restart and despite this now appearing at least imminent, the spot uranium price is failing to respond. Last week again saw little activity and no urgency from buyers, forcing a handful of sellers to accept lower prices. Four transactions totalling 800,000lbs U3O8 equivalent were conducted, reports industry consultant TradeTech, and TradeTech has reduced its weekly spot price indicator by US25c to US$35.75/lb.
No transactions were reported in the term market and TradeTech’s term price indicators remain unchanged at US$37.75/lb (mid) and US$50.00/lb (long).
In supply-side news, the first ore has now been produced at Cameco’s massive Cigar Lake project in Canada. First production has taken nine years due to flooding incidents in both 2006 and 2008, although a subdued uranium market in recent years has no doubt impacted on Cameco’s urgency.
In demand-side news, China is reportedly now on track to surpass its earlier 2020 nuclear power goals despite new Chinese reactor projects being suspended following the Fukushima accident and more stringent safety requirements being imposed. In 2013, approximately 10% of China’s electricity demand was supplied by non-fossil fuel sources and the goal is for that level to hit 15% by 2020. The Chinese National Nuclear Corp now suggests 20 or more new reactors could be built in the next six years.
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