Uranium Seen Rebounding as Japan Readies Nuclear Restarts

Jul 16, 2014 1:16 am ET

(Updates with NRA approval of report in 10th paragraph.)

July 16 (Bloomberg) -- Uranium may rebound from the lowest prices in nine years as Japan moves closer to restarting the first of its idled nuclear reactors, signaling a potential increase in consumption of the atomic fuel.

Japan’s nuclear regulator vouched for the safety of two facilities in the country’s south, setting in motion the possible return of atomic power. A resumption of plants may boost uranium prices that slid after the 2011 disaster in Fukushima, said Cantor Fitzgerald LP, a New York-based broker.

Uranium has fallen about 60 percent since the meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant in March 2011 led to the closing of Japan’s nuclear reactors, reducing demand as supply swelled. The restart will make the nation less reliant on imports of fossil fuels such as liquefied natural gas and boost uranium producers from Australia to Kazakhstan, some of whom canceled projects and closed mines as prices declined.

“Nuclear reactor restarts in Japan have been viewed as a vital catalyst for uranium prices,” Rob Chang, an analyst at Cantor Fitzgerald in Toronto, said in an e-mailed note yesterday. “The restart is much needed as Japan deals with its first summer without any nuclear power in 40 years.”

The atomic fuel dropped to $28 a pound on May 19, the lowest since May 2005, according to data from Ux Consulting Co. in Roswell, Georgia. Prices have decreased 17 percent this year and closed at $28.50 yesterday.

Kyushu Electric Power Co.’s reactors at its Sendai facility in southern Japan passed safety checks, the Nuclear Regulation Authority said in a draft report. It’s the first safety assessment of a Japanese nuclear plant from the regulator, which was set up after a predecessor ignored warnings before the disaster in Fukushima.

Uranium Glut

Restarts are the “most important psychological catalyst for the uranium space,” David Sadowski, a Vancouver-based analyst at Raymond James Ltd., said on June 19. The financial adviser predicts a surplus of 10 million pounds this year.

The supply overhang is cutting off any price upside, Morgan Stanley said in a July 8 note, reducing its 2014 price forecast by 21 percent to $30.81 a pound. The bank also lowered its 2015 estimate by 21 percent to $36.

Paladin Energy Ltd. said in February it will halt its Kayelekera operation in Malawi while Russia’s Atomredmetzoloto last year shuttered Honeymoon in Australia. Kazakhstan, the world’s biggest producer, said in November it will halt all projects aimed at increasing output.

The NRA’s commissioners approved the draft safety report at a meeting today and agreed to move to the next step of seeking public comment. Japan has been without atomic power since September.

The meltdown at the Fukushima Dai-Ichi plant forced the evacuation of about 160,000 people because of a radiation fallout. It was the worst civilian atomic disaster since Chernobyl in 1986.