TORONTO (miningweekly.com) – The continued shuttering of Japan’s reactor fleet, low prices and a supply overhang continue to weigh on the uranium market, Cameco VP, marketing strategy and administration Tim Gabruch told delegates at the Prospectors and Developers Association Conference on Sunday.

But the positive, long-term fundamentals, mainly driven by China bringing new reactors on stream, remain robust and will start to be felt in the next few years, he added.

“The demand for electricity is increasing at a rapid pace. In fact, according to the International Energy Agency, global electricity consumption is will be 70% higher in 2035 than it is today,” he said. “We believe nuclear energy will be an important part of that mix.”

“[But] the Japanese situation remains unclear. The restart of its shuttered fleet of reactors is experiencing further delays,” he added.

“There’s also been more uranium than expected from secondary sources; these are the previously mined and milled sources of uranium sitting in inventory ready to come to market,” he explained.

“Much of this has been the result of the uranium enrichment market, which is also facing post-Fukushima challenges. [They have been] using underutilised operations to essentially create a surplus of uranium that they are then able to sell into the market,” he continued.

Gabruch also noted the closure of four reactors in the US and the temporary shutdown on six reactors in South Korea during 2013.

The effects of supply overhang and subdued demand has been witnessed most notably in long-term contracting. “[In 2013] arrangements entered into between the utilities and suppliers, like Cameco, were at historic lows. In total, only 70-million pounds of uranium was contracted in 2013 and specifically long-term contracting accounted for only 20-million pounds,” Gabruch said.

“Utility fuel buyers have been reluctant to enter into the market given the uncertainty that remains around Japan … with no upward pressure on the market, they are happy to sit tight for the time being,” he added. “On the other side, many uranium producers … have little incentive to enter into new long-term arrangements based on today’s low market prices.”

But with Japan, the significant cost of imported energy is starting to bite. “Pressure is starting to mount to restart its fleet and eight utilities in that country have applied for 17 reactors to be restarted,” he said.

Gabruch also explored the positive mid- to long-term factors, including the conclusion of the Megatons to Megawatts Programme with Russia at end-2013. He also explained that about 15 reactors are expected to be connected to the grid in 2014, with the growth being led by China.

“Beyond those 15 reactors, 70 are under construction today. If the start-ups occur as planned, then 50 of those units will be online in the next three years,” he said. “This is real, tangible growth at a level that we haven’t seen for decades.”

“So while the long-term fundamentals of our industry, and the outlook for uranium remains positive, the continuing saga of the uranium market [means] that there remains uncertainty in the near-term,” he concluded.