x Abu Dhabi, UAE Thursday 20 July 2017

Japan crisis forces world to examine nuclear position

Japan's nuclear woes reverberate around the world, rattling fuel and stock prices, thoughts refocus regional energy plans.

While Japan struggles to contain its worsening nuclear crisis, repercussions from the disaster are already spreading around the globe.

The disaster is rattling international commodity markets and shaking the positions many governments had staked out regarding the world's most controversial low-carbon energy source.

The events unfolding in northeastern Japan are shaping up to be the worst catastrophe the nuclear industry has faced since the 1986 explosion of the Chernobyl nuclear plant in Ukraine spewed radioactive material across most of the northern hemisphere.

So far, experts do not expect even the worst-case scenario in Japan to approach the severity of the Chernobyl disaster, and at least some analysts say it is too soon to sound the nuclear industry's death knell. Nevertheless, further delays are virtually assured to the long-predicted worldwide "nuclear renaissance", which has already endured an extended gestation period.

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"Meltdown is a very big word in people's minds, so I think that the public sentiment is probably going to swing against nuclear power," said Edward Sterck(CK), an analyst at BMO Capital Markets(CK). "But I don't think this is the end of the nuclear industry."

But investors' initial reaction to this morning's news of a third explosion at the Fukushima Dai-ichi 1 nuclear plant, about 240km north of Tokyo, on the Pacific coast of northern Honshu Island, has been to dump any stock connected with the sector.

The stock of Tokyo Electric Power (Tepco), the unfortunate Japanese utility that operates the stricken plant, has been the hardest hit, with analysts predicting it could sink to a record low. Since Friday, Tepco has been battling the spreading crisis that now encompasses three of the big plant's six reactors and a nuclear waste containment pond.

That was after the biggest earthquake ever recorded in Japan and an ensuing tsunami started a cascade of troubles at the site by knocking out the power supply to pumps that kept cooling water flowing past the reactors' nuclear fuel rods.

The share prices of uranium miners such as Cameco in Canada and the French Areva, which also designs nuclear plants, have plunged. Neither have investors spared the US conglomerate General Electric or Japan's Hitachi, which both have large nuclear divisions, despite their wide holdings in other industrial sectors. They have also punished electric utilities outside Japan that own nuclear plants, such as the US power companies Entergy and Exelon.

On international commodities markets, uranium prices have fallen sharply, and other energy commodities have also been affected.

The physical and humanitarian devastation from the triple-whammy disaster could derail Japan's fragile economic recovery, curbing energy consumption, so crude has pulled back from the heights it scaled earlier this month on concerns about Mena-region supply disruptions.

Natural gas prices, in contrast, have risen around the world, on expectations that Japan will need to import large extra volumes of liquefied natural gas. The battered country will need to press more of its excess thermal power generation into service to compensate for the nuclear shut-downs as it starts to get back on its feet. In the long-term, gas is expected to be the fuel of choice for both economic and environmental reasons.

 

tcarlisle@thenational.ae