Is a Nuclear Spring Coming?

Is a nuclear spring on the way? Uranium prices have stopped falling, which is good news for the industry, and Japan is planning to restart some of its reactors, which is even better news. 

Uranium miners such as Cameco (NYSE: CCJ  )  and Denison Mines  (NYSEMKT: DNN  ) are already up significantly year to date, but can the positive trend continue?

Future demand from Japan
Under the economic policies of Prime Minister Shinzo Abe, Japan is trying to stimulate its economy at all costs. Japan's economy has been stuck in neutral after two decades of deflation and all the damage that comes along with it. To get Japanese consumers spending again, Shinzo Abe is unleashing QE-squared through Abenomics, which intends to improve the Japanese economy by:

a) pumping the stock market to increase consumer confidence and spending through the wealth effect;

b) devaluing the yen to increase aggregate demand;

c) improving economic competitiveness by building infrastructure projects. 

While the Nikkei has rallied and the yen has fallen, Japan's overall economic competitiveness is still in question. Abenomic's margin for success is razor thin. Any push or drag, no matter how small, can potentially decide whether Abenomics works or fails.

Restarting nuclear reactors would be a positive push for Japan, as nuclear comprised 30% of Japan's total energy mix before Fukushima. The energy source is significantly cheaper than imported LNG and would improve Japan's economic competitiveness by lowering electric costs. 

For the uranium market, any increase in Japanese demand would likely translate to higher uranium prices given that Japan accounted for nearly 12% of uranium demand before the nuclear reactor accident (compared to the de minimis amount now). 

Long-term demand from emerging nations
While Western countries such as Germany and Switzerland are phasing out nuclear, there is still a future for nuclear energy because of demand from emerging markets. 

For the emerging markets like China, nuclear energy is worth the risk. Those nations need energy to keep their economies growing. Because of pollution issues, they cannot depend on coal exclusively, nor can they rely on cheap natural gas as they are yet to develop their own massive shale reserves. Likewise, renewable energy is still costly despite rapid growth in recent years. 

Adopting nuclear aggressively would help those nations mitigate pollution while improving energy security.

For the uranium market, demand from emerging markets is a big opportunity that may more than compensate for the decreased demand from the West.

While only 20 of the world's total 434 operating nuclear reactors are currently Chinese, the nation is building 28 more and has an additional 58 in planning stages. India is building six nuclear reactors and has 18 in the planning stages. In short, barring a paradigm breakthrough in renewable energy,  uranium demand will still be strong for decades to come.

The bottom line
After a long winter, nuclear fundamentals are becoming attractive. Japan is planning to restart some of its nuclear reactors while Russia is asking for higher prices for its uranium after the expiration of the Megatons-to-Megawatts program.  

Prices have stabilized, and many market participants now expect them to go higher. 

In the long term, Cameco is probably the best bet. The company is a market leader and a low-cost producer. Because of this, the company has managed to stay profitable even when uranium prices fell below $40.  

The company has the production costs and balance sheet to survive in bad times and thrive in good times.  

Another interesting opportunity is Denison Mines. While more speculative than Cameco because it is not currently profitable, the company does have a solid balance sheet to wait out the low prices, and has stakes in promising uranium mines that may make it attractive as an acquisition.

BHP Billiton (NYSE: BHP  ) is another uranium producer. The company is much bigger and more diversified than Cameco and Denison Mines. Because it gets a significant part of revenue from copper, coal, and iron ore, the company is also more dependent on China's macro condition in the short term. That could be either a good thing or bad thing depending on China's economy.

Uranium miners have taken it on the chin after Fukushima, but industry fundamentals are slowly turning the nuclear winter to spring. 

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  • Report this Comment On March 02, 2014, at 10:46 PM, Pallas89 wrote:

    Spoiler alert. This article above discussing a nuclear “renaissance” or whatever is pure dross.

    In reality, Nuclear power people are ONLY about making money, damn the life ending consequences. Nuclear power profiteering is the most Machiavellian manner of blood sucking from other humans and from the finite ecosystem on which we are all absolutely dependent and cannot, absolutely, replace...What does the public get when we fulfill short-term greed billionaire owners of nuclear power investments? We get forever death from nuclear waste, not a speck of nuclear waste is stored safely for the life of the waste. Nuclear waste gets MORE radioactive, not less radioactive, for more than 250,000 years. How so? Largely, nuclear reactor “spent fuel” gains more Plutonium (Pu), the most radioactive substance and therefore most toxic thing on the planet by about 2,000,000x in terms of ionizing radioactivity. Some of the worst and most common isotopes of Plutonium last for 24,000,000 years total. Some of the 94 long-lived fallout constituents last for longer than the universe has been around, or for more than 15 billion years! We monkeys don’t have very long attention spans. This is not something we ought be dealing with!

    It takes one pound of Plutonium to end all human life properly distributed. As mentioned there are 94 long lasting radionuclides in all nuclear power waste and thousands of shorter lived decay or daughter products in all nuclear waste from power generation of any kind. What’s the problem with radionuclides? Ever hear of DNA? Fallout doesn’t just damage DNA, sending that damage forever forward every single generation thereafter, but ends the ability to reproduce once internal bioaccumulation has reached a certain point. This is NOT a remote possibility in these times.

    Remember radionuclides destroy DNA. There is no recovery without about a billion to several billion years and I’m talking for all life destroyed by 9 pounds of Plutonium properly distributed. Each nuclear reactor core of fuel generates tons and tons each year…of Plutonium. None of that is adequately stored or managed. Why? That costs too much, cuts into profits. Isn’t capitalism grand?

    None of it is safely stored. “spent” nuclear reactor fuel (removed because it becomes a million times more radioactive than the Uranium dioxide that is initially installed in most cases, readily bursts into flames if not very carefully managed. Spent fuel bursts into flames in water if there is insufficient neutron inhibitors, such as boron, thermal regulation or other substance to stop the neutron excursion that produces nuclear decay process from quickening. By itself, Plutonium in air also bursts into flames. Nuclear fire is the end of everything if just a single spent fuel pool is allowed to burn for even a few days. Bye bye all life. Do you want that? When will you wake up.

    How much Plutonium (Invented or re-discovered at U.S. Berkeley, CA in 1940 at the super modern sounding, pathetic, Cyclotron!—do study the declassified material from the filthy Manhattan Project yourselves) is in the trigger mechanism of each and every (with a few exceptions) nuclear bomb? About 12 pounds or more is found in at least 40,000 such triggers around the world. Remember, only 9 pounds ends all life. Think think think. Stop the status quo power elite. They really don’t know what they're doing beyond your wildest imagination. Why not? Greed makes all insane with the most insane being those who ought be most sated by their wealth, the wealthiest.

    In 1957, the same dumb nuclear physics engineers said that civilian nuclear power was safe. You believe them again? Previous Plutonium releasing accidents, such as Sellafield aka Windscale, Mayak, Chernobyl, Kashiwazaki Kariwa, Tsuruga, Oi, Fukushima Dai Ichi, Three Mile Island, Hanford, Lawrence Livermore Labs,.. do NOT take my word for it. Please, please research these disasters with Fukushima Dai Ichi in Japan 2011 dwarfing all the previous accidents by many thousands to an infinite order of magnitude. Fukushima Dai Ichi is the cataclysm that will end, not just human life, but all life and this is not an if, but a, “it is happening now.” You can't trust your leaders right now. End their power. You know how deep down.

    How long has all of modern society been around, and I'm just counting since the "invention" (and a studid one in fact) of agriculture? 6,000-40,000 years is the scientific community accepted range. Humans, Homo sapiens sapiens (modern species, 200K years old only). How long since we started really burning fossil fuels? We begin with gusto to burn such at the beginning of the lamentable and also very stupid wealthy psychosis driven Industrial Revolution from about 1760. Most of the net additions of carbon to the atmosphere, however and most of our technological, stupid monkey, advances have been since the 1950's.

    $90B could outfit the world, every nation with 24/7/365 pollution free matrix of power generation from diverse and democratically, and community controlled (not billionaire controlled—the part they hate) sources. Nuclear is not at all needed. It's forever waste is not at all needed and all costs of all nuclear accidents are always born by the citizens. There is no private insurer that will insure a nuclear power plant. I wouldn't be surprised if every nation's power needs could be provided for a LOT less than $90B. Research it if you'd like to learn more. You do have the time, if you’re still alive, and it is you responsibility...See the documentary “Chernobyl Heart” if you want to see what seven days of open air fissioning produces. Fukushima Dai Ichi cataclysm is at least three nuclear reactor cores, now molten coriums, fissioning endlessly for three years.

    These are human creations and we are all equally responsible. How much is hoarded by the world’s 1200 or so billionaires? TRILLIONS and many or most of those billionaires are profiteering directly or indirectly off poisoning the planet forever through nuclear, the worst, or from other filthy stupid monkey endeavors? This must end now! It is your responsibility now in this lifetime to stop billionaires in this moment!

  • Report this Comment On March 02, 2014, at 11:10 PM, GuestPost wrote:

    Oh what Shinzu Abe won't do for nuclear energy--->

    https://farm8.staticflickr.com/7413/12786681205_df3584bdb4_b...

    artwork by W. Banzai

  • Report this Comment On March 03, 2014, at 9:29 AM, gregM wrote:

    If those crazy Ukrainians take over a nuclear reactor we could have nuclear winter.

  • Report this Comment On March 03, 2014, at 12:10 PM, HoosierRube wrote:

    So, how many deaths have been attributed to nuclear energy in the last 60 years?

    I think the number is .02 people per year.

    That's even better than wind power.

    What is it your saying? Oh...

    'The sky is falling; They sky is falling'.

    The reality is, if you quit working on problems, you'll never progress.

    And the country with the cheapest power sources will be the ultimate winners.

    I'd also look at another documentary of Chernobly 30 years later..

    The wildlife flourishes. The flora flourishes. And that is the reality.

    Reality is always a better guidepost than a rant.

    The end of the world scenarios from the first poster is just a huge rant about everything. nuclear power, rich people, and whoever the stupid monkey people are.

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