Commodities | Jul 22 2014
By Greg Peel
We recall that back in May, Japan’s Nuclear Regulation Authority tacitly approved new safety standards at Kansai Electric’s Ohi units 3 and 4 in the Tokyo prefecture. It appeared at the time Japan might be very close to restarting the first of its idled reactors, given the Abe government was champing at the bit, but local government approval first needed to be sought.
As it was, 189 residents of Tokyo and surrounds declared they could be at danger in the case of an accident, and the local district court agreed. Residents were not safe were the reactors to suffer a meltdown, or natural disasters such as tornadoes or volcanic eruptions, or other threats including terrorist attack. It was back to the drawing board, for both Kansai and the NRA.
Last week, however, Kyushu Electric Power’s Sendai units 1 and 2 in the Kagoshima prefecture were granted safety approval by the NRA under strict new regulations which take into consideration the above. Kyushu Electric has built a ten metre barrier to protect seawater pumps in the event of severe accident, prompted by the destruction of similar pumps at the Fukushima complex as a result of the 2011 earthquake and tsunami. The prime minister has suggested the government is ready to reactivate any of the idled reactors across the country as soon as they achieve NRA approval.
This means the first Japanese reactors restarts could be very close. However as was the case in Tokyo, a month-long public comment period now commences, and consent must be granted by the Kagoshima governor and the local government. The fat lady has not yet sung, and nor perhaps have questions of safety under asteroid strike, alien invasion or attack by Godzilla that might yet be raised by Kagoshima residents been answered.
The world waits.
As testament to uranium market weariness of restart false alarms, the spot uranium market was very quiet last week, industry consultant TradeTech reports. Only three transactions were completed totalling approximately 300,000lbs of U3O8 equivalent and no utilities were involved. TradeTech’s spot price indicator remains unchanged this week at US$28.30/lb, which incidentally is US5c higher than where it was when Kansai’s reactor restarts were overruled.
There was nevertheless a spark of interest noted from utilities in the spot market last week, with TradeTech reporting a handful finally wandering in to gauge interest. One issued a formal request for offers of up to 500,000lbs for delivery in September. In the term market, a utility selected its preferred supplier of 7mlbs U3O8 to be delivered over multiple periods beginning 2019.
TradeTech’s term price indicators remain unchanged at US$31/lb (mid) and US$44/lb (long).
CIMB's uranium analysts are leaning to the conservative side on the expected timing of Japanese reactor restarts. Having previously assumed the Sendai reactors would come on line by the end of this year, CIMB is now assuming a further year's delay. The longer Japan is without nuclear power, the more global inventories build up, hence the broker has cut its uranium price forecasts out to 2016.
That said, CIMB has also assessed reductions in global supply in the interim and modelled the demand-supply balance looking forward. The analysts expect inventory excess will begin to be soaked up over the next 12-24 months which will at least lead to market tightening, if not a deficit.
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