FUND VIEW-No permanent damage to uranium demand from Japan
24 Mar 2011 12:08 ET * German power prices shot up 17 pct since closures
* Small hiccup in uranium demand, spot price down
By Pratima Desai
LONDON, March 24 (Reuters) - There will be no lasting impact on uranium demand from Japan's nuclear emergency, because there are no feasible alternatives for power generation, a portfolio manager at CQS New City Investment Managers said.
John Wong, who runs the Geiger Counter fund at CQS, expects only four of Japan's 54 nuclear reactors, which provide about 30 percent of the country's electricity, to shut down permanently.
"Those four reactors use roughly about 1.4 million lbs of uranium demand a year. The ones in Germany, being conservative, if they are shut for six months would account for about 1.8 million lbs," Wong said.
Wong added that global demand this year was estimated at 180 million lbs.
"In the short term there will be some loss of demand, but it's a only small amount, and in the medium to long term there will be no significant change," he said this week.
Geiger Counter's assets total more than 100 million pounds ($162.2 million), and the fund's net asset value has jumped 80 percent over the past 12 months.
Its top three holdings are London-listed Kalahari Minerals , Toronto-listed Rockgate and Uranium One .
Japan's Fukushima nuclear plant north of Tokyo was battered by a 9.0 magnitude earthquake and a tsunami that left thousands of people dead or missing. Radiation leaks from the plant have still not been brought under control. [ID:nLDE72A217]
JAPAN IMPACT
The crisis prompted Italy to announce a one-year moratorium on site selection and the building of nuclear power plants.
Germany has ordered the closure of all plants that started operating before 1980 for at least three months, so that they can undergo safety checks. [ID:nLDE72G21L]
"The price of baseload electricity in Germany has shot up by 17 percent since the closures. They will want to bring these reactors back at some point, because electricity costs are raising the price of everything," Wong said.
"Do I think it's the end of nuclear power? No, it's the cleanest and cheapest way to generate electricity. There are a few places where there will be a bit of a hiccup in uranium demand, but the numbers are immaterial."
Meanwhile China has put on hold approvals for proposed plants. According to the World Nuclear Association, China has 13 working nuclear power stations, 27 under construction, 50 planned and 110 proposed. [ID:nLDE72H109]
"These numbers give you the sense of scale. They don't have many other options for power generation," Wong said, adding that uranium prices on the spot market fell last week in reaction to the Japan crisis.
Spot prices of uranium oxide , the saleable form of uranium, had surged 76 percent over six months to a peak in early February of $73 per lb. It has fallen to $60 a lb, down more than 15 percent.
"Last week when you saw the spot price come down, only about 3,600,000 lbs changed hands, not a large amount. The people who sold it were financial players," Wong said.
"The last long-term price agreed (between a consumer and producer) was $73 a lb. There has been no change in the pricing of long-term contracts for the last two weeks."
Full article at Reuters.
