Japan consumes about 8 to 12 percent of the world’s uranium supply, depending on which source you reference. Of course, nearly a dozen of the country’s 55 nuclear plants is not consuming any uranium post-tsunami; instead, engineers are hastily employing methods from improvised containment to cooling fuel rods with seawater to prevent any sort of radioactive fallout. You may even think that because several governments are talking tough on curbing nuclear power, uranium might be in the toilet for good.
But according to several sources, uranium, although taking a hit in spot prices and being unloaded by the ton by investors/speculators worldwide, has some pretty solid fundamentals behind it (we’ll get into that shortly.) Just as the mainstream press spends lead-headline real estate on the looming nuclear threat while burying the mounting non-radiation-related death toll, market watchers are seizing upon the plummeting uranium spot price instead of taking the long view.
One blogger, Agustino Fontevecchia, has been at the forefront of uranium coverage, writing for Forbes. He details a number of companies (such as uranium miners and energy production suppliers), ETFs and other funds that are losing out because of the tsunami, with short-term valuations plunging. For example, Saskatchewan-based Cameco, Canada’s biggest producer and one of the world’s largest, was down 13 to 15 percent on Monday. (In a Globe and Mail article, Greg Barnes, an analyst at TD Securities, Inc., said “in a worst-case scenario, the company could lose 10 per cent of its sales volume in 2011 because of the Japanese problems.) Uranium, mind you, is not traded on any exchanges. Fontevecchia, rather cheekily, throws this out there: “In the long run, though, the prospects for the industry look sweet.Ã‚Â Buying opportunity?
Cameco, among others, is not downcast about the future. Why? They know that the likes of India, South Korea, and especially China, need to feed their nuclear power hunger with uranium and will continue to do so, regardless of the frightening accounts from Japan. Cameco CEO Jerry Grandey said Monday that the stock markets are being “driven largely by emotion and that Chinese and Indian demand should keep long-term demand up. Demand should outpace supply ” at least through 2012, Desjardins Securities analyst John Redstone told the Globe and Mail.
With Japan’s market demand for uranium decreasing 20-25 percent in recent days, UxC’s VP for Uranium Nick Carter told Forbes’ Fontevecchia that China is, in effect, more than ready to make up the difference. “China, which produces only 2 or 2.5 million pounds [of uranium annually] is looking to take its production to 70 or 80 gigawatts (GW) in the next ten years, from about 10 GWs today, even if they cut their forecasts, they will still have to import a lot, Carter is quoted as saying.
Indeed, as MetalMiner reported several months ago, this means China would be quadrupling its uranium consumption to 50 million to 60 million pounds a year, compared with annual global demand of about 190 million pounds at the time of the post. (China already has long-term contracts with Cameco and Areva, another Top-10 producer.) The Chinese had embarked on an ambitious and aggressive buying spree at prices some 30 percent over current spot and twice spot prices of a year ago, tying up long-term supply offtake agreements and joint ventures. Ralph Profiti, analyst at Credit Suisse in Toronto, believed China was getting ahead of other consumers and, as with copper and non-ferrous metals, was building up a strategic stockpile before the Americans, Japan or Korea needed to restock before the New Year. The latest from Reuters is that China has a total of 187 reactors currently being built or in the planning stages.
Will Chinese power plants be as safe as possible? That remains to be seen. But the intractable environmental problems the country faces from rapid growth, among other things, will force China to continue planning for nuclear power expansion.
But don’t take it from us take it from the horse’s mouth. As Bloomberg reported, China National Nuclear Corp. President Sun Qin said in an interview in Beijing after attending the National People’s Congress that “the pace of the country’s nuclear development won’t be affected by events in Japan.