Stock advice in actual English.
Joined Sep 2, 2009
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Japan Reactor Restarts Continue

I’ve held a growing position in CCJ since the Fukushima reactor melted down and outlook on nuclear power soured. It has done poorly, but I remain wedded to it. Within the next few years we are going to see pricing for uranium recover and the suppliers are going to do very well indeed.

The Japanese, continue their “patient” process of reactor restarts with courts finally clearing two more this month for reactivation. And of course, by “patient”, I mean “the Japanese are the slowest most irritatingly conservative people on the God damn planet”. But we are finally getting there nonetheless.

A Japanese court on Thursday ruled that two nuclear reactors could be restarted after the operator said in an appeal that they were safe. The Fukui District Court in western Japan lifted an April injunction that was filed by a group of residents who said that an earthquake exceeding the reactors’ quake resistance could cause a disaster similar to the Fukushima crisis set off by a March 2011 quake and tsunami. The order paves the way for a resumption of the Takahama No. 3 and No. 4 reactors, operated by the Kansai Electric Power Company.

The declaration of nuclear power’s death was more than premature. Nuclear power is not dying at all. At this phase, it looks like U308 pricing has set a bottom and the real price for uranium (actually recorded by non-distressed companies like CCJ) has remained higher than the quotes being pushed around on the internet.

For the moment the collapse of hydrocarbon pricing is actually taking the most immediate pressure point off the table for keeping nuclear around, but there are still plenty of reasons why the power source isn’t going anywhere.

The most basic of these reasons is just the broad need of power we have. The planet is advancing; the rest of the world is no longer content to let the West live in the lap of luxury, free from all hunger and cold to work on the most pressing problems of micro-aggressions, while they dig in the mud.

The population of Earth is heavily concentrated in the East. India and China alone make up somewhere around 37% of Earth’s population. As they progress into the late stages of a technological revolution, their demand for power is going to soar. Do you really believe the Chinese care where that power comes from?

China, India, the lot of them, are going to build out EVERY power source available. Coal, nuclear, oil, hydroelectric, wind, solar …if it can turn on a light bulb, it’s getting done. They aren’t going to restrict themselves because some uppity American twat really loves polar bears and aspires to maybe go see some one day.

Now some people are making the case that the recent UN agreement is actually paving the way for more nuclear. I’m not going to buy into that. I’d actually make the case that the UN climate agreement is 99% talk and hype and that there really isn’t such a thing as international law anyway, so only a handful of suckers are going to follow through with what’s written on that paper. The climate agreement’s primary purpose is to funnel billions of hard earned American dollars overseas to bank accounts of the well connected.

But the climate deal does highlight an interesting point. Countries have made pledges to halt emissions growth but those pledges are not completely imaginary. They do seem to be based on emissions expectations for the next few years. And those expectations have a lot of nuclear power built into them.

China is already in the process of doubling their nuclear fleet. Their goal is to quadruple that this decade.

On the Western front, faux-concerned rich people continue to insist that free power come from nowhere especially, which is ironic seeing the West is where Kelvin, Hess, Maxwell, and Gibbs were all born. But if the power flow is actually disrupted I would imagine the pitchfork (or more aptly AR-15) carrying mobs will snap these lunatics out of it. So if we are actually going to attempt to hit these emissions numbers, then there aren’t that many ways to do it.

There is a report floating around that says the US could be almost 100% renewables powered. Of course nobody actually read the report, because if they had you’d realize the extent of madness needed to get there. The point of that report was to discredit the “base load” argument, but the content of the report does a better job of supporting it. In order to completely phase out the traditional power sources, you would need to vastly overbuild the wind and solar sources. It would be extremely wasteful. Otherwise, the variance of power generation would cause problems in the grid.

So my guess is that, for instance, Germany’s insistence they’ll be completely nuclear free (and coal free, and natural gas free, and thermodynamics free) by the early 2020’s in complete crap. Actually, my guess is Merkel’s party gets thrown from power (for unrelated reasons) and reneging on that particular promise will be one of the first orders of business for whoever triumphantly stands over her.

In the US, natural gas generation growth and the sudden collapse of commodities is taking some nuclear power out of commission. I’m not sure if anything is going to reduce this trend, since the GOP doesn’t seem to be going anywhere and they don’t give two fucks about gimmicky fad concepts like “clean energy”.

But big picture, I think US and European reactors will experience only marginal decommissioning (from market pressure and equipment aging). I’m not betting those reactors get replaced just yet, but on the Eastern front, you’re going to see every reactor the West lets idle be replaced by 2 or 3.

These new models have even better safety records than the old 70’s and 80’s models running in the West – which are already basically mortality free – and my guess is seeing them operate will pave the way for a fleet upgrade here at home.

The goal of most countries should be to have a diverse mix of energy sources. In the US, entrenched coal generation has been challenged very effectively. But coal isn’t going away, it’s just going to drop to its even share of the load. Once other sources claim enough market share, they’ll hike prices until equilibrium takes incentives for further conversion off the table. Unfortunately for coal producers, that isn’t a good thing right now. But following enough bankruptcies, there will be room to edge back into the coal industry.

Globally I expect that to be a consistent theme. East countries need more nuclear power to get there (but they need more of everything anyway). South America has very little nuclear capacity and I wouldn’t be surprised if some build out occurs there as well. Europe and North America will slide as they let aging reactors be decommissioned and can’t work up the effort to replace them. The Middle East will continue to push for nuclear because it’s a nice fix to their geographical location, because competition between countries will pick up as one or two implement the source (and because each time they do, America freaks out and showers them with billions at the bargaining table). Africa just needs every source it can possibly get.

Global markets are still experiencing weakness, and demand is soft. But once we work through this patch, it’s back on. Energy is a great place to be for the next 10 years, if you can look past the pain right now. And uranium specifically is a good bet.

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  1. velth

    Long URA for awhile in a long term outlook. Not down too bad. Good to hear things may turn up.

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  2. firehorsecaper

    Great post. $CCJ is the play. Long, fretful, hopeful. Will add when it breaks $17 in 2016.

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  3. granpa

    Mr. CT, I laugh at myself everytime I look at CCJ. I parked a chunk of money in it one or two days before hell broke loose. It’s the cream of the crop, so I hold and may very well add at some point in the future.
    I looked at hundreds of charts for RC’s 2016 contest and couldn’t find anything that looked like a home run. In a Costanza move I took CCJ.
    I enjoyed your write up. Thank you and Happy New Year.

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