Bringing Intelligence to the Nuclear Conversation
March 14, 2011
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It is no surprise that uranium suppliers, nuclear reactor builders, and uranium ETFs were down across the board today. Most stocks are still well off of their mid-summer lows, the ETFs not so much. The world is watching the situation in Japan as officials at multiple plants try to contain radiation leaks and cool reactors without back-up power (except for diesel generators) and cooling systems in 3 three reactors. Government officials in nuclear nations are calling for a moratorium on new reactor planning and questioning the safety of reactors already in place - rightfully so. However, investors should not mistake a call for concern as a declaration that "nuclear is dead", as Cramer so intellectually put it. Here's why:
Supply Uranium supplies will see a short-term surplus as Japan defers yellowcake deleveries to its damaged reactors. Other than that, no reactors currently in operation will suddenly decommision themselves. Future reactors may be put on hold in Europe and the US, especially as the fear-mongering continues in the media and talkheads like Cramer, but countries like China, India, and Brazil - that desperately need the power - are plowing full-steam ahead. India and Brazil have different government structures than China, which may talk of pulling back, but probably won't take any significant action. The demand is simply too great.
After the Cold War the US and Soviet Union agreed to a program called Megatons to Megawatts (M2M). Surplus warheads would be deconstructed and have their uranium reprocessed for use in nuclear power plants. M2M currently supplies HALF (10% of our electricity) of the US's uranium and is scheduled to end in 2013. Uranium takes a long time to mine; and while new domestic mines are currently being planned they won't be operational for another 6-10 years (2017-2021). The enormous demand increase that will abrubtly begin in 2013 will only add to the worlds demand for uranium, further increasing the spot price.
Europe Germany had decided to extend the life of most of its nuclear plants, which are decades old. One must understand that it is extremely difficult to obtain licenses for a new plant - not to mention expensive. So why pull the plug if the thing is working? Well, those plans were put on hold Monday. That shouldn't shock anyone, but don't fret over it. The reality is, those plants probably shouldn't have had their lives extended in the first place (engineering plant design 101). European countries will meet on Tuesday to discuss their preparedness in the event of a disaster that affect their nuclear plants. Austria's nuclear chief has called for "stress tests" to analyze the strength of Europe's plants.
United States Nuclear power in the US currently makes up 20% of our electric generation capacity. After Three Mile Island, many newly planned reactors were cancelled (ones that were started were completed). Obama's call for more nuclear plants has helped fuel the Nuclear Renaissance, but that will probably take a hit. It could be a huge mistake. Little do the media tell us, but some key environmental groups are actually IN FAVOR of nuclear power. It is clean, safe, and emits no carbon (just radioactive steam apparently. I joke!)
New Plants The Fukushima plants in Japan are over 40 years old, which, in the nuclear industry, means they practically use Stone Age technology. Newer plants are designed differenlty and have more safety features built in. For instance, key controls and pumping systems are located in the basement of the Fukushima plants (which are nearly identical to the Oyster Creek plant in Toms River, NJ. Built by GE at the same time.). Back-up power generators are located below sea level behind a seawall. Misplaced confidence in the seawall has made the situation much less "by the book", which is why they are flooding the reactors with seawater. The reactors will never be useful again, but they were scheduled for decommission at the end of this month anyway. Oh the irony!
New plant construction should not be halted. If anything government officials and industry leaders should be placing more confidence in newer designs. Simply cancelling newly planned reactors will only put the US in a big hole for electrical generation when our plants are decommissioned - a 20% hole. That is not so easy to fill by natural gas, coal, or alternatives. In fact, one pound of uranium produces the same amount of energy as 20,000 pounds of coal.
In my opinion, if half a dozen 40 year old reactors can withstand a 8.9 earthquake, a tsunami, and several hundred aftershocks (most of which were 5.0 or greater) - nuclear power is a winner. Of course, the worst case scenario is still possible. Until that happens though, lets not overreact. Exactly 0 people have died in nuclear accidents in the United States. The total for planet Earth is not much higher, relatively speaking. You make an insanely more lethal decision every time you drive your car, walk outside when its thundering, or jump into a swimming pool.
Cameco CEO Gerald W. Grandey shrugged off the developments so far. He said people are acting on emotion, rightfully so, and added that CCJ does not see a disruption in the short or long term to its supply lines (except the deferments of Japanese plants). CCJ is still on target for its 2011 forecasts.
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