After the accident at the Fukushima nuclear power plant in 2011 (which killed no one), Japan has been avoiding nuclear energy. The country halted most of its nuclear plant operations and stopped developing new facilities.
Japan shifted to crude oil, gas, and coal—all of which are emissions-heavy. Nuclear power generation went to almost zero.
Soaring energy costs and the global “green transition” pushed Japan to reverse its policies on nuclear power. Earlier this week, the country released a plan to restart its nuclear power stations. It also pledged to prolong its existing plants’ useful lives and develop a new generation of power plants.
It’s a major shift that could affect the uranium market.
Before the Fukushima accident, nuclear energy provided about one-third of Japan’s total energy generation. Last year, the share of nuclear power dropped to 5%. The new policy outlines a goal of 20% to 22%.
This move can increase the global demand for uranium, the core commodity used in nuclear plants. Japan will likely try to secure long-term uranium supply contracts. And fill its strategic reserves.
It won’t be simple. Uranium is in short supply. As an example, a power plant located in Wyoming has been delayed by at least two years due to the lack of enriched uranium it needs.
According to Statista, by 2035, the global demand for uranium will be 1.8 times higher than the total supply from new and existing mines.
This is a potential catalyst for uranium prices. Miners might be the first to benefit from Japan’s new policy and the growing demand for nuclear fuel.
Copper Market Shocks Create a Bullish Setup
Last week, the global copper supply shortage got worse.
Panama’s government shut down one of the largest copper mines in the world, the $10-billion Cobre Panama.
First Quantum, the mine’s operator, brought it online in 2019. And last year, the mine was responsible for 1.5% of the global copper supply.
That’s a massive number for a single mine. For comparison, Brazil produced 324,000 tonnes of copper last year. So, this move is quite like shutting down the entire copper industry in Brazil.
The main reason for halting the mine was a failure to negotiate the new tax regime. The government wanted to boost its budget via higher taxes, and the miner wasn’t keen on seeing a larger tax bill.
Now, both parties are in a losing position. First Quantum isn’t making money while the mine is offline, and the state is not getting any tax revenue from one of the world’s largest copper projects.
But there’s more to this picture. The copper supply-demand balance is tight, and losing one of the largest sources of supply will make the looming copper shortage even worse.
Industry insiders have already forecast a massive copper deficit by the end of the decade. The major commodity trader and miner, Glencore, estimates a 50-million-tonne supply gap from 2022 to 2030.
Closing one of the world’s largest copper mines won’t help address that.
On top of that, a major copper mine in Peru is facing challenges. The local protests at the Las Bambas mine restricted ore shipments. As a result, the mine is close to the limit of its stockpile capacity. Las Bambas is responsible for 1.4% of the world’s copper production.
Right now, it’s up and running, but it may soon have no room to store the ore. That could ultimately lead to a production halt. And the copper market can lose another 290,000 tonnes of copper in annual supply.
The copper market is getting hit hard by the political instability in Latin America. But it could create a bullish setup for the commodity itself. Over the past three months, the price of copper has increased by 13% already.
Thank you for your loyal readership,
The Financial Star team