Japanese utilities start selling uranium fuel into depressed market

Company accounts for the financial year ended in March showed that nuclear fuel valuations ranged from nearly two times market capitalization in the case of Hokkaido Electric Power to 16 percent for Chubu Electric Power. (Reuters)
Updated 23 August 2019

Japanese utilities start selling uranium fuel into depressed market

  • Sales by Japanese utilities “are definitely showing up more in the market”

TOKYO: Japan’s nuclear operators are starting to sell some of their huge holdings of uranium fuel, as chances fade of restarting many more reactors eight years after the Fukushima nuclear disaster.
The sales so far have been small, but were made at values well below their purchase price and are likely to further depress the already beaten-down uranium market, say two senior market specialists.
They could also focus attention on the balance sheets of the country’s utilities, bolstered by holdings of nuclear fuel valued at 2.5 trillion yen ($24 billion), a figure that market experts say is highly unrealistic.
“Given the extended shutdown of our reactors, we are selling uranium as well as canceling long-term contracts where necessary,” Japan Atomic told Reuters in a statement.
The company, which is yet to receive all the regulatory approvals needed to restart reactors at either of its two nuclear stations, declined to provide further details.
Before the meltdowns at Tokyo Electric Power’s Fukushima plant in March 2011 after an earthquake and tsunami, Japan was the world’s third-biggest user of nuclear power behind the United States and France, operating 54 nuclear reactors.
It is permanently shutting 40% of its facilities and just nine of the 33 remaining have restarted. With reactors also being closed in the United States, Germany, Belgium and other countries, traders and specialists say the market is likely to remain depressed for years.
Unlike other commodities such as crude oil, most of the nuclear fuel market is privately traded, generally on long-term contracts, although CME Group’s NYMEX has a futures contract for uranium oxide (U308).
The contract is settled on prices supplied by US-based UxC LLC and is currently trading at about a third of where it was before Fukushima. US based UxC, LLC also calculates prices for converted and enriched uranium.
Sales by Japanese utilities “are definitely showing up more in the market,” said one US-based market specialist, who requested anonymity because of the sensitive nature of the industry.
“Some are selling uranium, some are selling more upstream products or services,” such as enriched uranium, he said. “Japanese inventory is a big overhang in the market.”
A senior fuel trader told Reuters his company had purchased nuclear fuel from a Japanese utility but declined to give details.
Japan Atomic was responding to a Reuters survey of 10 Japanese utilities that have operated nuclear plants. All the other utilities declined to comment on whether they had sold any nuclear fuel.
One said it adjusts supplies for optimal inventory levels and three said they have delayed deliveries of fuel.
Tepco in 2017 canceled a supply contract with Canadian uranium fuel producer Cameco, which was awarded $40.3 million in damages last month by an arbitration panel.
“Tepco has made efforts to reduce its holdings of nuclear fuel, such as by partly reducing uranium purchase contracts,” the company told Reuters, without giving further details.
Unlike in Europe and the United States, Japanese utilities are not required to mark to market their fuel holdings. They are booked on Japanese operators’ balance sheets as fixed assets at the purchase price, the utilities told Reuters.
“If the utilities are not going to use the fuel, and it is unlikely they will get many more reactors going, then at some point they will have to take losses on their holdings,” said Tom O’Sullivan, the founder of energy consultancy Mathyos Japan.
Company accounts for the financial year ended in March showed that nuclear fuel valuations ranged from nearly two times market capitalization in the case of Hokkaido Electric Power to 16 percent for Chubu Electric Power.
Sector-wide the nuclear fuel valuation is nearly 50 percent of the market value of the nine publicly traded utilities, calculations by Reuters showed.
Japanese utilities also count spent fuel that is being reprocessed into highly toxic plutonium for future use in reactors as an asset on their balance sheets.
The country has the world’s biggest inventory of plutonium held by a state without nuclear weapons, but experts say it may be more of a liability than an asset.
“That is not something they can sell and get paid for,” said Tomas Kaberger, energy and environment professor at Chalmers University of Technology and a board member of Swedish nuclear operator Vattenfall.
“It is something they will have to spend a lot of money on to build a repository for that can last a few hundred thousand years,” Kaberger said.


Barclays sees $2 per barrel impact to oil prices as coronavirus fears threaten demand

Updated 28 January 2020

Barclays sees $2 per barrel impact to oil prices as coronavirus fears threaten demand

  • More than 100 people have died and over 4,000 cases of the new virus have been confirmed in China
  • Barclays expects the OPEC and other allies to step in and take further measures to keep the markets tight

BENGALURU: Barclays said on Tuesday oil prices will be impacted by $2 per barrel on the potential economic fallout from the coronavirus outbreak in China.
More than 100 people have died and over 4,000 cases of the new virus have been confirmed in China, leading authorities to increase preventive measures, impose travel restrictions and also extend the Lunar New Year holidays to limit the spread of the virus.
The bank sees a $2 per barrel downside to their full-year Brent and WTI forecasts of $62 per barrel and $57 per barrel, respectively.
Compounding the effects of the spillover to economic growth from China and the region, Barclays expects transitory oil demand erosion of about 0.6-0.8 million barrels per day (mb/d) in the first quarter of this year, or 0.2 mb/d for the full year.
“If air passenger traffic in China declined by half in first quarter of 2020, it would likely lead to a 300,000 barrels per day year on year decline in jet-kerosene demand from China,” the bank said adding the fall in road transport would likely be less severe than in the past given reduced reliance on buses.
Barclays expects the Organization of the Petroleum Exporting Countries and other allies to step in and take further measures to keep the markets tight, in case the fall in demand is more acute.
Oil prices have been down for the last six sessions, but the bank said that the market reaction was likely overdone.
Barclays said the actual economic fallout from the coronavirus could be less severe than the 2003 SARS outbreak, given that the new virus seems less lethal than SARS so far and the measures taken by Chinese authorities.
The bank said the geopolitical risks to global supplies remain high as US-Iran tensions could continue to gradually escalate and oil production in Libya could fall further if the blockade of key infrastructure facilities continues.
Brent crude prices are currently trading around $59 per barrel and US WTI at around at $53 per barrel.