The Conversation (0)
Positive news from Japan last week helped offset some negative sentiment in the uranium market after the recent setback with the Takahama reactors. Here’s a look at a few companies that saw positive share price reactions.
Positive news from Japan last week helped offset some negative sentiment in the uranium market after the recent setback with the Takahama reactors.
Specifically, the Kagoshima District Court rejected a lawsuit that would have halted the restart of Kyushu Electric Power Company’s (TSE:9508) Sendai nuclear station. The court overruled residents in the region who were concerned about the plant’s safety.
With the positive decision by the Japanese court, two reactors at Sendai could be restarted as early as June. Sendai is expected to be the first plant to restart following the Fukushima disaster four years ago.
The approval is a big win for Prime Minister Shinzo Abe, who is working hard to get Japan’s 48 idle reactors back online. Indeed, restarting its nuclear fleet is of the utmost importance to Japan, which is spending an estimated US$40 million per year on importing fossil fuels in order to offset the loss of electricity generated by nuclear power, Cantor Fitzgerald analyst Rob Chang said in a note to clients.
Meanwhile, Reuters notes that the ruling “is also a vote of confidence for a revamped regulator and suggests another court ruling last week to prevent the operation of two reactors west of Tokyo may have been an aberration for Japan’s conservative judiciary.”
For his part, Raymond James analyst David Sadowski said in a note to clients that the decision “significantly de-risks the reactor restart process,” and should make it easier for the other 16 reactors that have applied to the Nuclear Regulatory Authority to get the green light.
Uranium market picks up on positive news
As investors well know, positive news on the nuclear front is often positive news for uranium stocks. On the back of last week’s news, Cameco (TSX:CCO,NYSE:CCJ) saw some positive activity, with its share price climbing almost 7 percent for the week. Likewise, Uranium Participation (TSX:U) was up 3.69 percent.
Making bigger gains during the week were Ur-Energy (TSX:URE,NYSEMKT:URG) with a 16.82-percent jump and Denison Mines (TSX:DML,NYSEMKT:DNN), which was up 13.85 percent.
Happily for investors, analysts seem to believe that more good fortune may be coming. For instance, despite the recent developments in Japan, Chang maintains the view that the uranium market is gearing up for a “violent upward move in the price.” He’s basing that view on the fact that he sees an unavoidable deficit hitting the market in about five years. Put simply, despite the current oversupply situation, by roughly 2020 the market will need more supply as both primary and secondary sources will not be enough to meet rising demand.
Sadowski is also optimistic about the future of the uranium market. The Raymond James analyst is looking in particular to the return of utilities contracting to meet uncovered requirements — the first instance of that was the recent India-Cameco deal. He expects both spot and long-term prices to react accordingly, moving towards the mine-incentivizing levels of US$70 per pound of U3O8 within the next six to 12 months.
Prior to the news from Japan, the uranium price had slipped $0.15, to $38.85 per pound of U3O8.
Related reading: