Bloomberg News

Uranium Bounce Seen From Seven-Year Low on Japan: Energy Markets

June 11, 2013

Uranium is set to rebound from its worst slump in seven years as Japan, once the world’s third-biggest nuclear-power producer, starts reactors after safety requirements are put into effect next month.

The atomic fuel may average $48 a pound in the third quarter after sliding to $39.75 last week, the lowest since at least March 2006, according to the median forecast from banks including Bank of America Corp. and Toronto-Dominion Bank. Japan may resume operations at five plants this year, according to the estimates of 13 analysts and producers compiled by Bloomberg.

A recovery in uranium prices would benefit suppliers such as Australia’s Paladin Energy Ltd. (PDN) and Cameco Corp. (CCO) in Canada, while hurting natural-gas exporters such as Qatar, which helped plug Japan’s power deficit following its March 2011 earthquake. All but two of Japan’s 50 reactors remain shut after the disaster and must meet stricter safety standards set by the Nuclear Regulation Authority before they can resume.

“Even if the NRA grants permission for one restart, that will at least improve sentiment and probably flow through to prices,” said Joel Crane, the vice president of research at Morgan Stanley in Melbourne who predicts as many as five plants will resume this year. “It basically signals that utilities will come back to the market,” he said, forecasting uranium may average $43.41 a pound in 2013.

Price Stall

Uranium for immediate delivery has dropped as much as 8.6 percent this year after a 17 percent slump in 2012, according to data from Ux Consulting, which provides research on the nuclear industry. Prices slid below $40 in the week ended June 10 for the first time since March 2006 and have averaged about $42 this year. They climbed as high as $152 in June 2007.

The fuel will average $46.18 in 2013, according to the median estimate from five banks compiled by Bloomberg. The slump in prices has sparked some buying interest for delivery later this year and in early 2014, Ux said in a note this week.

The NRA in January approved the outline of safety standards for idled reactors such as tougher tsunami defenses after the meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant, which caused the evacuation of 160,000 people. Kansai Electric Power Co.’s No. 3 and No. 4 units at its Ohi plant are the only operational facilities among the nation’s 50 reactors.

Larger Number

“It seems unlikely that many units will be able to get back online in a short period of time after this July,” Jonathan Hinze, a senior vice president at Roswell, Georgia-based Ux Consulting, who predicts two reactors will start by the end of the year, said in an e-mail. “However, looking to 2014, I do anticipate a much larger number, possibly up to 12 units, returning to service by the end of next year.”

Japan generated 280 billion kilowatt-hours of electricity from atomic plants in 2010, behind only the U.S. at 807 billion and France at 410 billion, according to the World Nuclear Association. That dropped to 156 billion kilowatt-hours in 2011. The nation’s estimated uranium requirement was 4,636 metric tons in 2012, down from 8,003 tons in 2010, the WNA data show.

The nation paid 6 trillion yen ($61 billion) for a record 87.3 million tons of liquefied natural gas in 2012, according to customs data. The fuel cost an average $16.70 per million British thermal units, or almost six times as much as the $2.83 average price of U.S. gas traded on the New York Mercantile Exchange last year.

Paladin Outlook

Japan may resume as many as six reactors in the second half of 2013, John Borshoff, the chief executive officer of Perth-based Paladin said on a conference call in May. Saskatoon-based Cameco, the world’s third-biggest miner of the fuel, last month reiterated a forecast of between six and eight restarts, while Areva SA Chief Executive Officer Luc Oursel in March predicted six. The forecasts in the Bloomberg survey ranged from no reactor restarts to as many as 10.

Shikoku Electric Power Co. and Kyushu Electric Power Co. plan to apply for restarts in July, they said last month. Shikoku’s Ikata No. 3 reactor may resume in October, the first among the idled units, Hidetoshi Shioda, a Tokyo-based analyst at SMBC Nikko Securities Inc., said in April.

Kansai Electric Power and Hokkaido Electric Power Co. plan to submit applications to the NRA to start their reactors as soon as they can after new safety requirements are put into effect, spokesmen at the companies said May 28.

Idled plants may gradually resume after January, Hiroyuki Sakaida, a Tokyo-based analyst at Goldman Sachs Group Inc., wrote in a report last month.

China Demand

World uranium demand is forecast to increase 48 percent over the next decade, according to the World Nuclear Association. About 435 reactors around the world with combined capacity of more than 370 gigawatts consume about 78,000 tons of uranium oxide concentrate containing 66,000 tons of uranium each year, according to the association.

China, the world’s biggest energy user and third-largest uranium consumer, is building 28 reactors, the most of any country, to add to the 17 it already operates, according to the association. The country is seeking to increase its nuclear-power capacity to 40 million kilowatts in 2015 from 12.54 million kilowatts at the end of 2011, according to a government paper released Oct. 24.

While China suspended approvals of new reactors following the Japan disaster to perform checks, the State Council passed a nuclear power-safety plan and a development schedule for the industry in October, effectively lifting the moratorium. China started building a reactor in the eastern province of Shandong in December.

Japan will still be the biggest driver of uranium prices in the near term, David Sadowski, an analyst at Raymond James Ltd., said in an April 30 report. The atomic fuel may rise in the second half of 2013 amid speculation that units are due to start, irrespective of timing, he said, predicting as many as three plants will resume operations this year.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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