Uranium Week: Japanese Reactors Given Green Light

This story features MACQUARIE GROUP LIMITED. For more info SHARE ANALYSIS: MQG

By Greg Peel

On October 28, the municipal assembly of Satsumasendai in the Kagoshima prefecture of Japan voted to approve the restart of Kyushu Electric’s Sendai nuclear plants one and two, three years and seven months after all of Japan’s reactors were idled in the wake of the Fukushima disaster. The Mayor of Kagoshima also provided approval. Japan is back in the nuclear game.

It is interesting to note that three days later, the Bank of Japan announced an increase in its annual QE monetary stimulus to 80 trillion yen from a previous 60-70 trillion. The announcement sent the yen plunging, which is the intended consequence in an attempt to boost Japan’s exports economy. But Japan has failed to lift its trade balance out of deficit in the post-Fukushima years despite massive stimulus, due to the offsetting significant cost of LNG imports. Japan has been forced to use gas to fire electricity production while its many reactors lay idle. Now that reactor restarts are due from early next year, Japan finally has the opportunity to wind back its trade deficit.

Japan will nevertheless not return to the same level of nuclear energy capacity it once enjoyed. The new Japanese Economy, Trade & Industry minister suggested last week nuclear generation will return to account for less than 30% of Japan’s electricity needs, down from 60% before the tsunami tragedy.

Anticipation of restart approval stirred up uranium market intermediaries last month, who this time last year were desperately attempting to offload inventories at any price when restarts looked increasingly remote. Australia’s Macquarie Group ((MQG)) has now joined the fray as a uranium trader, having recently bought Deutsche Bank’s trading book and inventories. Intermediaries accounted for around 90% of the volume traded in October, on both buy and sell sides, leading to a deal of spot market volatility. Industry consultant TradeTech’s spot price indicator rose as high as US$36.75/lb last week before settling back to close the week, and the month, at US$36.25/lb, up US50c from the week before and US95c up for the month.

Volumes were lower in October than September, with 3.1mlbs of U3O8 equivalent changing hands over 31 transactions, compared to 4.1mlbs last month over 28 transactions. Utilities – the real end-users – have been nibbling away lately but are expected to step up purchases as we approach year end. 

Two transactions were concluded in the term market in October, involving around 1mlbs for mid-term delivery. TradeTech’s mid-term price indicator has risen to US$38.75/lb from last month’s US$37.75/lb. The consultant’s long-term price indicator remains unchanged at US$45.00/lb.
 

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