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The city assembly of Satsumasendai voted to allow the restart of two nuclear power plant reactors, with analysts saying the news will provide welcome relief to the industry.
Nuclear power took a significant step forward in Japan after the city assembly of Satsumasendai voted to restart reactors one and two at the Sendai nuclear power plant.
The two reactors are the only ones to have passed the Nuclear Regulatory Agency’s stringent new safety standards. Those include safeguards against various natural disasters as the country looks to limit any incident reminiscent of the Fukushima disaster.
In a research note, Dundee Capital Market analyst David Talbot wrote that the news could possibly provide a boost for the price of uranium.
“Despite five plus years of stockpiles in the country we expect Japan to honor existing contracts and likely continue to contract uranium in an effort to maintain relationships with producers that often take years to nurture,” he said.
However, the outcome of the vote doesn’t necessarily mean the reactors will restart right away. According to The Guardian, the two reactors must pass operational safety checks, and officials in the prefecture must give their approval for both of them to be restarted. As a result, the reactors are unlikely to be restarted until early 2015.
With uranium prices up roughly 28 percent over the last three months while stocks have traded down 22 percent, Talbot sees this as a perfect entry point for investors to get back into the uranium market.
Speaking with Uranium Investing News, he said the shutdown of nuclear power plants has hit Japan’s economy hard, and a tipping point could be in the cards.
“I think the time has come when residents of Japan get tired of paying $100 million a day in keeping these reactors offline. Their GDP growth is stagnating,” he said.
In the short term, Talbot said he is unsure how prices will react; however, in the long term, he believes investors could see a price rally similar to what was seen in August and September of this year.
“This could ideally help [prices],” he said. “In the first and second quarter of next year you might see a price rally.”
The only dark spot is that some local municipalities are still not keen on the idea of nuclear power plant restarts, with 15,000 residents of nearby Ichikikushikino signing a petition opposing nuclear restarts.
Securities Disclosure: I, Nick Wells, hold no direct or indirect investment in any of the company’s mentioned.