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Uranium Week: Japan’s Ups And Downs

Commodities | May 26 2015

By Greg Peel

To date, the only two Japanese reactors to have satisfied all new safety requirements and received regulatory approval for restart are Kyushu Power Co’s Sendai units 1 and 2. It’s been a long road to this point, with a previous court ruling sending Kyushu back to the drawing board to address community fears for their safety were the reactors to be subject to earthquake, terrorist attack or some other high-level misadventure.

But Kyushu did satisfy these requirements, as far as the regulator and local courts were concerned, and despite lingering public protest it is expected Sendai unit 1 will restart in July and unit 2 will follow some months later.

The next reactors to satisfy regulatory requirements were Kansai Power Co’s Takahama units 3 and 4, although no restart time had yet been suggested. And last week it was the turn of Shikoku Power Co, which received approval to restart its Ikata plant. This is particularly good news for Shikoku given Ikata represented about 40% of the company’s pre-Fukushima electricity production.

But just when all was looking rosy for the government and nuclear power supporters, the Fukui district court has dealt a blow by upholding an injunction banning the restart of Takahama units 3 and 4. While the Japanese Nuclear Regulation Authority was forced to further tighten its safety requirements in the wake of the initial ruling against Sendai, the Fukui district court clearly has its own ideas of what’s safe and what’s not.

The court described the NRA’s guidelines as “too loose” and “irrational”.

So it’s one step forward, two steps back for the Japanese nuclear power industry, as it has been since the Abe government first pushed to revive nuclear energy post-Fukushima. While the government has greatly benefitted from the fall in oil and gas prices, the level of exports of fossil fuels required to substitute for lost nuclear power are greatly restricting the government’s attempts to revive the Japanese economy.

And while this was not good news last week for the global uranium industry, further bad news was to arrive in the form of a report by Tokyo Electric Power Co outlining its intentions to minimize further accumulation of uranium inventories.

Given utilities purchase uranium almost exclusively through long term delivery contracts, TEPCO has been forced to continue building its inventories even as its reactors have been shut down. The company had previously announced it was talking to its contracted suppliers about what options it might have, but given the first reactor restarts are nigh, the market was likely hoping contract cancellations were not a likely outcome.

Unfortunately, that’s exactly what TEPCO is trying to do.

There were six transactions totalling 600,000 pounds of U3O8 equivalent concluded in the spot uranium market last week, industry consultant TradeTech reports. Prices were net weaker over the period as the market absorbed the TEPCO news. TradeTech’s weekly spot price indicator has fallen US40c to US$35.25/lb.

There were three transactions concluded in the mid-term market last week, but only for small amounts. TradeTech’s term price indicators remain unchanged at US$40.25 (mid) and US$49.00/lb (long).

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