Uranium to power the near-term future—RFC Ambrian

Despite a high level of public skepticism about the future of the nuclear industry after the Fukushima disaster, RFC Ambrian Research says the fundamentals for a recovery “are still very much in place and that there are a number of industry catalysts in the short-to-mid-term that we think will lead to the medium-to-long-term growth plans eventually being realized.”

 “The two years since the Fukushima accident in March have been challenging for the uranium sector,” said the report. The shutdown of Japan’s reactors contributed to a steady decline in uranium spot prices, which left uranium producers struggling to make profits.

“Fortunately, there is light at the end of the tunnel, and the uranium sector should be set for happier times and improved pricing in the short-to-mid-term,” RFC Ambrian advised. The Nuclear Regulation Authority in Japan has imposed strict new guidelines and ten applications have been submitted to re-start reactors this month. The majority of Japan’s reactors should be back on line around the beginning of next year, said RFC Ambrian Research Analysts Duncan Hughes, Craig Foggo and Jessica Mauss.

“On top of this, demand is set to increase from China, Russia and India through the construction of an estimated 48 new nuclear reactors. Globally, the IAEA reports that there are 65 reactors under construction,” the analysts advised.

Despite the positive outlook for future demand, “uranium equities are yet to recover from the sell-off that was seen after Fukushima,” said the analysts.

“Equities represent the main tool for those wishing to invest in uranium and we find it strange that, despite the evidence that future demand will continue to grow, they remain depressed,” said RFC Ambrian. “M&A transactions seen over the last few years indicate a number of key players in the sector are taking advantage of this depressed market.”

Uranium supply is heavily concentrated in the hands of a few producers and operations, the analysts observed.

Nearly all of that uranium supply will require enrichment, which could be a potential bottleneck, said RFC Ambrian. Only nine countries have the capacity for uranium enrichment with four main players, supported by their respective governments: Tenex (Russia), USEC (US), Eurodif/Areva (France) and Urenco (UK, Germany, Netherlands).