Uranium is poised to rebound from a second annual decline as Japan considers restarting its atomic plants almost two years after the Fukushima disaster and China pushes ahead with the world’s biggest nuclear building program.
The price of the fuel for immediate delivery may average $55 a pound in 2013, according to the median of five analyst estimates in a Bloomberg News survey conducted last month. The nuclear fuel slipped 14 percent to an average $48.72 in 2012 and traded at a three-year low of $40.65 in November, data compiled by Bloomberg show.
A revival in demand from Japan is raising the prospect that supplies of the radioactive metal will shrink at the same time as China continues with a project to increase its nuclear power capacity at least fivefold by 2020. That’s a boost for uranium producers such as Perth, Australia-based Paladin Energy Ltd. It’s also a blow for liquefied natural gas exporters including Qatar and Australia, which have helped plug Japan’s power shortage since the earthquake that led to the meltdown at the Fukushima Dai-Ichi plant in March 2011.
“The biggest pressure on price at the moment is not necessarily the downgrade to demand since Fukushima, it’s this massive inventory overhang,” said Joel Crane, the vice president of research at Morgan Stanley in Melbourne. “Should the Japanese government give the green light to restarts, that overhang is instantly gone and that will be very positive for prices.”
The uranium forecasts for 2013 ranged from $45 to $62.60 a ton in the Bloomberg survey conducted Dec. 10 to Dec. 19. That compares with a three-year high of $73 in February 2011, according to data from Roswell, Georgia-based Ux Consulting, which advises the nuclear industry. The fuel averaged $56.80 in 2011 and was $43 a pound on Jan. 3.
The price plunged as low as $49.75 a ton in March 2011 after Japan’s biggest earthquake on record and a subsequent tsunami damaged reactors at the Fukushima site run by Tokyo Electric Power Co., releasing radiation and causing the evacuation of 160,000 people. The government responded to the disaster by keeping all 54 of the nation’s then-functioning atomic plants shut after safety checks, while countries from China to France reviewed their nuclear policies and Germany said it would close its facilities.
Japan’s 10 regional utilities generated or purchased 2.4 percent of their electricity from nuclear plants in November, down from 27 percent in February 2011. Japan’s installed nuclear capacity is 46,148 megawatts at its 50 operable plants. Fossil-fuel plants accounted for 73 percent, up from 50 percent.
Speculation that uranium demand will rebound has grown since Dec. 16, when Japan’s Liberal Democrat Party won a landslide election victory. The previous administration of the Democratic Party of Japan, which ordered the shutdowns, planned to phase out nuclear power by the end of the 2030s. The LDP was ousted in 2009, two years before Fukushima, after ruling for all but 10 months since 1955 and overseeing the country’s development of atomic energy.
The new government plans to establish a variety of sources for electricity generation within 10 years, including a review of the plan to exit nuclear power, Trade Minister Toshimitsu Motegi said Dec. 28.
“We can’t say for sure that Japan will be free of nuclear power by the 2030s,” Motegi said at a news conference in Tokyo. “We will make our decisions based on technological findings and not with prejudgment.”
The government and Japan’s utilities face public opposition to nuclear power amid concern that some plants are at risk of damage by future earthquakes. All but two of the nation’s reactors are still idled since Kansai Electric Power Co. resumed units at its Ohi plant in July.
The restart of reactors in Japan is going to be “fairly slow” and is unlikely to be done this year, capping uranium price gains, according to Thomas Neff, a physicist and uranium-industry analyst at the Massachusetts Institute of Technology in Cambridge, Massachusetts.
“It’s probably 2015 before you are going to get any strong demand signals sent to the market,” Neff said in a phone interview Dec. 28. “There’s no particularly good reason to think that it’s going to go up in the next year.”
Japan Atomic Power Co.’s Tsuruga and Tohoku Electric Power Co.’s Higashidori plants may be sitting on active geological faults, teams of scientists working for Japan’s Nuclear Regulation Authority said last month. Kansai Electric is conducting additional checks after an NRA team delayed a decision on whether a fault under its Ohi plant is active. Utilities aren’t allowed to construct reactor buildings and other important facilities above an active quake fault.
Tens of thousands of nuclear power opponents held weekly protests outside previous Prime Minister Yoshihiko Noda’s official residence last year. A government-backed public forum found in August that 47 percent of participants favored cutting nuclear power to zero, while newspaper polls in the last 18 months showed support for ending atomic power in Japan.
The government will await new safety standards before deciding whether to restart idled reactors, Shinzo Abe, Japan’s new prime minister, said Dec. 26. Japan’s new nuclear regulator has said it will announce the rules in July and Abe indicated some reactors may restart during the next three years if they meet the tougher safety standards.
“The uncertainty around Japan is holding prices back,” Jonathan Hinze, a senior vice president at Ux Consulting, said in an e-mailed response to questions last month. “The number one thing to help the price recover even more is additional Japanese reactor restarts.”
Stockmarket investors have been betting that the resumptions will occur and boost uranium demand just as China pushes on with plans to build at least 26 new reactors. At the same time, analysts are predicting a drop in the price of LNG as Japan’s utilities seek to reduce their electricity-generation costs by switching back to nuclear.
Paladin, which operates two uranium mines in Africa and has exploration assets in Australia, rose 22 percent in Sydney in the two days through Dec. 18. Energy Resources of Australia Ltd., whose Ranger mine in the Northern Territory produces about 10 percent of the world’s mined uranium, advanced 13 percent over the same period. Australia has the world’s largest known deposits of the fuel, according to the World Nuclear Association.
“The uranium price and Paladin would benefit from a re-start of Japanese reactors,” UBS AG analysts including Glynn Lawcock in Sydney said in a Dec. 17 report as the bank upgraded its rating on the stock to “buy” from “neutral.” “The latest change in government puts the re-start one step closer, in our opinion, albeit timing remains unclear.”
Kansai Electric’s shares rose 18 percent in Tokyo, the most since at least 1974, the day after the LDP returned to power. The company plans to restart the No. 3 and No. 4 units at its Takahama nuclear plant after July, it said in a Nov. 26 statement. Tokyo Electric, which surged 33 percent on Dec. 17, aims to start seven reactors at its Kashiwazaki Kariwa plant between April 2013 and September 2015, according to a business plan announced in May.
China has 14 reactors operating and the new ones planned, accounting for more than 40 percent of the plants being built globally, may increase the nation’s capacity to 60 gigawatts by 2020, according to the World Nuclear Association. The government put a temporary halt on authorization of new facilities after Fukushima, while continuing current projects. It approved a five-year nuclear safety plan at the end of May, without saying when it will start permitting more reactors.
The average price of LNG sold into northeast Asia will be $14.50 per million British thermal units this year as Japan’s nuclear resumptions curb demand while new supplies from countries including Angola and Algeria start, according to the median estimate of six analysts surveyed by Bloomberg News last month.
The cost of Japan’s LNG imports almost doubled in the past three years, reaching a record $18.07 per million Btu in July, according to Finance Ministry data. Purchases for the first 11 months of last year increased 11.5 percent from the same period in 2011 to a record 79.5 million tons, according to data from the ministry.
LNG for delivery to northeast Asia in four to eight weeks rose for a 14th week through Dec. 31, climbing 60 cents to $17.25 per million Btu, according to assessments by World Gas Intelligence. That’s the highest price since June.
The country must restart reactors quickly because of the price of fossil fuels, LDP General Council Chairman Hiroyuki Hosoda said Nov. 27. Tokyo Electric and seven other Japanese power utilities reported combined first-half losses equal to $8.4 billion after the shutdowns drove up the costs of electricity generation at oil-, gas- and coal-fired plants.
“Eventually Japan will have to make hard choices and restart,” Morgan Stanley’s Crane said. “There is simply not enough alternative to make up for the lost nuclear generation.”