Despite numerous statements by market commentators (myself included) on the looming “nuclear renaissance”, the uranium market remains stuck in neutral:
- The real catalyst for higher uranium prices is the restart of a portion of the Japanese reactor fleet.
- Recent elections in Tokyo hint that the political ruling class is in favor of nuclear reactor restarts – but when?
- Cameco (CCJ:NYSE, CCO:TSX) held their quarterly and year end results conference call on Monday and announced a scrapping of their plan to produce 36M lbs of U3O8 by 2018.
- This is not positive news for the uranium sector in the intermediate-term and has us sticking to the belief that focusing on near-term in-situ production stories in reliable political jurisdictions is the most sensible “investment” over the long-term with high grade hard rock discoveries in the Athabasca Basin serving as a good “trade.”
Grinding The Gears
I want to start today’s Note out with a clear statement of whom or what the culprit is for uranium’s relative underperformance. This is the lack of Japanese reactor restarts (but by no means the only culprit). Many market commentators (me included) had anticipated at least some of the reactors coming back on line at this point. This was one of the mistakes I made in 2013.While it’s also clear that the ENTIRE Japanese fleet will never come back online, anywhere from 20 to 30 reactors are anticipated to restart in the coming years. The thinking here is that once some of the Japanese reactors come back on line, this will breathe life into the uranium price and, coupled with the emerging market embrace of nuclear power, push spot and term uranium prices higher, enticing more exploration and production.