While uranium players will welcome the restart of Japan first nuclear reactor, it may take a while for a meaningful recovery in prices. Kyushu Electric Power confirmed on Monday that Sendai nuclear power unit no 1 would be restarted yesterday and be generating electricity by Friday. Full operation is expected in early September. It marks the first Japanese restart since the Fukushima nuclear disaster in early 2011.
The uranium spot price remains at $US 36.00 per pound. Londons Numis Securities estimates it will take more than that to break the current stalemate between uranium producers and nuclear utilities. The key will be the return to long-term contracting long-term average term volumes are circa 175 million pounds per annum, but were only 24M lbs in 2013 and 77M lbs in 2014, according to Cameco estimates, Numis said.
At present, there is no incentive for producers to lock-in low prices going forward, and on the other foot, utilities are not under pressure yet. Numis said the big unknown was the level of inventories.
On Cameco numbers, there are 64 reactors under construction worldwide, which should see an increase in uranium demand of 3 to 4% per annum and take consumption from 165M lbs to 230M lbs over the next 10 years. Producers such as Paladin Energy and Cameco have stated that the price would need to rise to at least $75/lb to incentivise new projects. Australian uranium stocks were mostly higher yesterday, including a 12.5% rise by Peninsula Energy, which is one of the few companies globally building a uranium mine.
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