Japanese nuclear resumption to boost uranium?

Another interesting note from Mac Bank today, this time on uranium:

On 8 July new safety requirements for nuclear reactors in Japan will come into force, as officially outlined by Japan‟s Nuclear Regulation Authority (NRA) last month. This is an important step towards nuclear restarts, with as many as 14 (of 50) reactors from 5 electric power companies intending to apply for NRA examination. Will this boost demand sufficiently to get the spot price, currently at a 7-year low, surging higher?

In our view, no. While we acknowledge that further downside to uranium prices is limited, we would caution that operations are unlikely to restart before the year-end and that current Japanese uranium stocks would comfortably cover initial core requirements for all 14 of these reactors. This is likely to lead to a milder recovery in prices than some players are anticipating; our 2014 price forecast of $52.5/lb is 8% below market consensus.

Recent developments in Japan have provided hope… On 19 June, Japan‟s nuclear regulation authority (NRA) officially outlined the requirements for nuclear restarts, due to take force on 8 July. These requirements were analysed by our Japanese equities analyst Polina Diyachkina at the time (New tougher standards for nuclear).

The main takeaways were that:

• No power reactors built on top of an active fault line will be allowed to operate – investigating this could be a lengthy and expensive process for some companies.
• Filtered venting systems – designed to release pressure build up in the case of an accident while retaining fission products – must be installed in all BWR-type reactors prior to restart, while there is a 5 year allowance for PWR types. It is therefore unlikely that BWR types will be able restart in the next couple of years due to a demand backlog for this equipment. This system was not installed at Fukushima-Daiichi and it is widely considered that radioactive releases post the disaster could have been significantly reduced if it had been installed.
• Tsunami protecting walls (breakwaters) must be built at coastal plants, with height depending on location. Interestingly the four crippled units of Fukushima-Daiichi already had a breakwater of the “correct” height installed at the time of the disaster.
• Many nuclear operators had already started taking these steps in advance of the official release and are thus ready to apply for restart on 8 July.
• We forecast initially that 12 reactors would apply for a restart, including the two currently operating Kansai plants, which will remain active until September before being shut down for maintenance. It has since been reported that a further 2 reactors could also be among the list of restart candidates. In Fig 4 below, we highlight the relevant units.
• The second batch will consist of the remainder: Tomari 1-3 (Hokkaido), Takahama 3-4 & Oi 3-4 (Kansai) and Genkai 3-4 (Kyushu).
• It has to be noted that given the limited resources of the NRA, only a few plants will be assessed at a time and it will likely take at least 6 months before any single plant is restarted. 
• Nevertheless, assuming this heralds a large-scale resumption of Japanese nuclear generation, we now review Japan‟s involvement in the physical uranium market since Fukushima and look at the theoretical uranium requirements for reactor restarts.