Uranium And The French Threat

By Greg Peel

Due to the Thanksgiving holiday weekend in the US, industry consultant TradeTech did not publish its usual weekly update on uranium spot market activity other than to note a US50c drop in the consultant's spot price indicator to US$52.25/lb, which has since been followed by a daily spot price move yesterday of another US25c down to US$52.00/lb. It seems the US$4/lb jump in the spot price from three weeks ago has proven no more than a blip.

In the meantime, Deutsche Bank analysts have been closely watching political developments in France. France has embraced nuclear energy for thirty years and at 74% of electricity generation, France was the highest proportionate consumer of nuclear power in the world in 2010.

France will hold presidential elections in two rounds in April and May followed by parliamentary elections in June. Polls currently suggest Socialist Party candidate Francois Hollande would knock off incumbent president Nicholas Sarkozy if elections were held today.

Assuming presidential polls also reflect parliamentary preferences, Deutsche suggests the nuclear industry should be rather concerned about a policy agreement between the Socialist Party and the French version of the Greens. The agreement, which is yet to be formerly signed, is to undertake to close 24 of France's 58 nuclear reactors by 2025. Two would be closed immediately and a moratorium would be placed on any new construction outside of the one plant currently being built.

In the scheme of things, suggests Deutsche, such a move would be a lot more significant than Germany's decision to wind down nuclear power made earlier this year after the Fukushima disaster. It would likely also prompt a nuclear rethink across all of the European Union, with Belgium an obvious first candidate for change.

Interestingly, the analysts estimate a switch to gas power as nuclear power is decommissioned in France would amount to an extra 73Mt of CO2 being released in 2012-20. Aside from how this fits into to European emission restrictions, one presumes it must also put the French environmental party somewhat at odds with itself. We note however that Germany's policy response has been to champion a much greater contribution from renewable energy. Whether polly-speak can be matched by reality within commercial bounds is still a matter of conjecture. 

Either way, Deutsche will watch political developments closely given the potentially "profound" implications for uranium prices on the one hand and gas prices on the other, as well as the impact on European CO2 pricing (which might be interesting for Australia).  

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