It only took a few days for the Japanese government to drop an outline policy recommendation from a cabinet panel, which, if implemented, would result in the country ending its reliance on nuclear power by 2040.
The Japanese government had come under intense pressure from industry lobbyists on fears that a switch to other forms of energy outlined within a recent national energy review would lead to a substantial increase in operating costs. So, despite the fact that a two-month consultation period made it plain that the Japanese public was overwhelmingly in favour of a phased withdrawal, there is now no firm undertaking in place. At the very least, it is probable that Japan will rely on nuclear energy to a certain extent until midway through this century when its latest reactors are decommissioned. In fact, the costs passed on to consumers and industry by domestic power companies are likely to increase if the nuclear industry is scaled back, because the decommissioning costs would no longer be offset by the previously planned increase in generating capacity.
Indeed, despite last year's meltdown at Japan's Fukushima Daiichi nuclear reactor, there is no sign of a wholesale global move away from the industry. True, Germany, which derives around a quarter of its current electricity needs from nuclear power, has pledged to close all its 17 reactors over the next 10 years, while simultaneously reducing its greenhouse gas emissions by 35 per cent. Italy is the only other developed economy to abandon its nuclear industry, following a referendum precipitated by the 1986 Chernobyl disaster.
However, a 'Nuclear Safety Review' published this year by the International Atomic Energy Agency (IAEA) found that demand for nuclear power across the globe shows little sign of abating. Most of the predicted growth, of course, is linked to emerging markets demand in Asia and the Middle-East, while even countries such as the UK, where there is quite vocal opposition, are committed to keeping nuclear as part of a diversified energy mix.
However, the fallout from the Fukushima disaster continues to weigh on the price of uranium ore and, by extension, uranium miners. Prices are being held in check by the fact that Japan temporarily closed all of its 50 reactors, thereby eliminating the need to replenish fuel stockpiles. The country has just started bringing some of its new generation reactors back online, although the wider process will drag on for months.
It's also worth noting that ore prices have also been undermined by supplies of enriched uranium from the partial decommissioning of the nuclear arsenals of Russia and the US. This practice is set to taper off next year, by which time 390 tonnes of enriched military uranium would have displaced 137,800 tonnes of uranium oxide mine production since the start of this century, representing 13 per cent of world reactor requirements.
The weak near-term pricing outlook has prompted some miners to postpone capital investment, as illustrated by BHP Billiton's decision to put its Olympic Dam copper/uranium development on ice. It is thought that prices will need to increase by around 30 per cent on this year's average of roughly $51/lb in order to justify renewed investment. Analyst opinion is split as to the duration of the current downturn in prices, with the most optimistic predictions at $70/lb-$75/lb by midway through 2014.
