Plans to restart at least two of Japan’s 48 nuclear reactors could have positive implications for the price of uranium and deliver a boost to ASX-listed uranium miners, including Paladin Energy Ltd (ASX: PDN).
According to The Diplomat, Japan’s Nuclear Regulation Authority (NRA) is about to begin safety inspections on at least one power plant. Japan’s nine nuclear power companies all have plans to restart their nuclear reactors.
But with 58% of Japanese people opposing any restart, and 59% opposing the use of nuclear energy to kickstart economic growth, the government and the energy providers will have their work cut out for them. The issue for Japan is that meeting peak summer energy demand without the nuclear power plants is going to be tough.
Uranium prices have crashed since the Fukushima incident in 2011, losing a further 30% in the last year to hit US$28.15 a pound. That’s well below the cost of production for most uranium miners. And in the short to medium term the outlook is not good, with RBC Capital Markets Analysts forecasting a price of US$31.50/lb this year and US$40 for 2015. But RBC has slashed its forecasts for 2016 to 2018 to between US$40 to US$45/lb, amid expectations that the uranium market will be in surplus until 2021.
Paladin’s cost of production in the last quarter at its Langer Heinrich mine stood at US$29/lb – and that’s not the all-in sustaining cost. The company was forced to place its other main mine Kayelekera mine on care & maintenance, with its production cost running at US$32.90/lb in the last quarter.
So it appears that the tough times will continue for Paladin and other ASX-listed uranium miners, including Energy Resources of Australia Limited (ASX: ERA) – which is majority-owned by Rio Tinto Limited (ASX: RIO). Foolish investors may want to skip the uranium producers for now.