Nuclear ETFs and the Japan Disaster
April 23rd 2011 at 4:21am by Tom Lydon
Exchange traded funds (ETFs) that invest in nuclear energy and uranium have fallen sharply amid Japan’s unfolding nuclear disaster.
After the tragedy in Japan, the nuclear industry has once again been put under the scrutiny of the public eye. Before the nuclear calamity in Fukushima, Japan, over 300 nuclear reactor projects were planned or proposed globally, with a majority of projects focused in the emerging markets, report Muriel Boselli and Geert De Clercq for Reuters. Now, there are 62 reactors under construction, mostly in the BRIC (Brazil, Russia, India, China) countries, with 158 planned or ordered and 324 being proposed.
Emerging markets like China, India, the Middle East and Eastern Europe will still continue their nuclear programs, but for the most part, developed countries have put a temporary hold on the industry. Richard Clegg, Global Nuclear Director at Lloyd’s Register, remarks that “the global socio-political and economic conditions that appear to be driving the renaissance of civil nuclear power are still there: the price of oil, demands for energy security, energy poverty and the search for low-carbon fuels to mitigate the effects of global warming.”
After the first reactor exploded in Japan, countries with nuclear power plants have begun a public relations frenzy to reassure the public of the redundant measures and safeties put in place. Nevertheless, anti-nuclear lobby activists state that demand for safer reactor designs as result of the events in Japan will increase the cost of nuclear power in the future.
For now, global nuclear projects that could be worth more than a trillion dollars are mostly tied to geopolitics. Firms trying to sell their nuclear wares will have to go through negotiations between two governments. A recent Wikileaks cable revealed that political decisions would likely “trump any and all expert input” and projects will ultimately come down to negotiable prices. [Uranium ETF Lower After Bounce.]
Since a single nuclear reactor plant may run up to a couple of billion dollars, some countries may be more inclined to cut corners. Scholars at the State Council Research Office recently commented that China was pushing its nuclear plans too quickly and building less reliable second-generation reactors. The scholars state that all new nuclear projects should be come from third-generation designs. [Uranium ETF: The Demand For Nuclear Reactors Is Still There.]
For more information on the nuclear industry, visit our nuclear energy category.
- Market Vectors Uranium+Nuclear Energy ETF (NYSEArca: NLR)
- iShares S&P Global Nuclear Energy Index Fund (NYSEArca: NUCL)
- PowerShares Global Nuclear Energy Portfolio (NYSEArca: PKN)
- Global X Uranium ETF (NYSEArca: URA)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.