Julia Gillard will use her first visit to India as Australia’s prime minister to begin uranium- sale talks, looking to open up a new market after appetite for nuclear fuel waned in the wake of Japan’s Fukushima disaster.
Gillard, who will meet Prime Minister Manmohan Singh and Congress Party President Sonia Gandhi in a three-day visit to New Delhi that begins today, will exploit an opening created when her party overturned a ban on uranium exports to India in December. She is aiming to tap increasing energy demand in the world’s second-most populous nation, which suffered widespread power blackouts this summer.
Exporting uranium to India will help Australian miners such as BHP Billiton Ltd. (BHP) and Rio Tinto Group-controlled Energy Resources of Australia Ltd. as falling commodity prices reduce revenues and a mining boom peaks. For India, building nuclear plants is one answer to address a power shortfall that curtails annual economic growth by as much as 1.2 percentage points.
“Any new market for uranium for Australian companies will be welcome with Germany and Japan phasing out nuclear energy post-Fukushima and demand for base metals off their highs,” said David Lennox, a resource analyst at Fat Prophets, a Sydney- based mining researcher and wealth management provider. “India has a large, growing population, an established economy and is already a big buyer of our coal.”
The price of uranium for immediate delivery, which soared to a record $136 a pound in 2007, declined to a two-year low last month and was trading at $45.75 on Oct. 8, according to Ux Consulting, a Roswell, Georgia-based uranium information provider. BHP and Paladin Energy Ltd. (PDN) have slowed or deferred development this year of some projects to produce the raw material in nuclear reactor fuel.
India’s government plans to spend about $175 billion over the next two decades as it seeks to curb power shortfalls crippling the economy. Power cuts are hurting industrial production amid an average 9 percent shortfall in peak power demand, according to the Central Electricity Authority.
Last year’s meltdown at the Fukushima Dai-Ichi nuclear plant and Indian protests over nuclear safety in the wake of the catastrophe haven’t deterred Singh from pushing ahead with plans to build more atomic power stations. The government aims to generate 8 percent of power from nuclear energy by 2030, up from 2.3 percent currently.
“Striking a deal on uranium exports is the big-ticket item that remains outstanding between the two countries,” said Uday Bhaskar, an adviser to New Delhi-based research group Society for Policy Studies. Getting supplies from Australia “would provide a lot of stability to India’s nuclear program,” he said.
Australia, the world’s third-biggest uranium supplier, previously banned sales to India because it wasn’t a signatory to the Nuclear Non-Proliferation Treaty. The South Asian nation has signed civil nuclear agreements with countries including the U.S., France and Russia after a three-decade ban on uranium supplies was lifted in September 2008 by the 46-member Nuclear Suppliers Group, which is charged with reducing proliferation by controlling the transfer of materials used to develop an atomic weapon.
Gillard’s government is expected to negotiate a treaty with India that replicates the conditions of the NPT, Australian Uranium Association Chief Executive Michael Angwin said in an Oct. 11 interview in Canberra. “Sales probably are still several years away,” he said.
Relations between the two countries were clouded in 2009 by a wave of attacks on Indian students studying in Melbourne, Australia’s second-biggest city, that resulted in a drop in applications for student visas.
Two-way goods and services trade totaled $21 billion in the year to June 30, 2011, led by sales of coal and gold, according to Australia government figures. India was Australia’s fourth- largest export market in the period.
Australia’s economy has been powered by Chinese demand for iron ore, coal and natural gas. With growth having slowed in the world’s second-biggest economy for six quarters, some mining projects in Australia are being delayed.
In August, BHP put approvals for about $68 billion of projects on hold, including the Olympic Dam copper and uranium mine, which Deutsche Bank estimated would cost $33 billion to build. Spot prices for iron ore, Australia’s biggest commodity export, are down 40 percent since reaching a record high of $191.90 a metric ton on Feb. 16 last year, according to The Steel Index Ltd.
Resources Minister Martin Ferguson last month said the global boom in commodity prices was over, increasing the importance of boosting exports into developing economies such as India.
“India, the world’s biggest democracy and one of the fastest growing major economies, stands in the front rank of Australia’s international partnerships and will be a key part of Australia’s future in the Asian Century,” Gillard said in an Oct. 11 statement.
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