On Friday 11 March 2011, Japan experienced a magnitude 9.0 earthquake. As a result of that earthquake, Japan then was hit with a large tsunami that devastated an entire region of the country.
The earthquake was centred 130km offshore the city of Sendai in Miyagi prefecture on the eastern coast of Honshu Island (the main part of Japan), and
was a rare and complex double quake giving a severe duration of about three minutes. An area of the seafloor extending 650km north-south moved 10-20m horizontally. Then, 41 minutes later at 3.42pm, the first tsunami wave hit, followed by a second eight minutes later. The tsunami inundated about 560km2, resulted in a human death toll of about 19,000, and caused much damage to coastal ports and towns with over a million buildings destroyed or partially collapsed. Eleven Japanese reactors at four separate nuclear power plants in the region were operating at the time, and all shut down automatically when the earthquake hit.
Subsequent inspection showed no significant damage to any of these reactors from the earthquake.
The reactors proved robust seismically, but ultimately were vulnerable to the tsunami.
At the Fukushima Daiichi plant, all six external power supply sources were lost due to earthquake damage, so the emergency diesel generators located in the basements of the turbine buildings started up. Initially, cooling would have been maintained through the main steam circuit bypassing the turbine and going through the condensers, however these submerged and damaged the seawater pumps for both the main condenser circuits as well as the auxiliary cooling circuits, notably the Residual Heat Removal (RHR) cooling system.
The tsunami also drowned the diesel generators and inundated the electrical switchgear and batteries, all located in the basements of the turbine buildings (the one surviving air-cooled generator was serving units five & six). So, there was a station blackout and the reactors were isolated from their ultimate heat sink, resulting in partial meltdown of the three reactors. The tsunamis also damaged and obstructed roads, making outside access difficult.
At 7.03pm the same day, a nuclear emergency was declared, and at 8.50pm the Fukushima Prefecture issued an evacuation order for people within 2km of the plant. At 9.23pm the prime minister extended this to 3km, and at 5.44am the next day he extended it to 10km. He visited the plant soon after. On Saturday 12 March, he extended the evacuation zone to 20km.
While there were no deaths or cases of radiation sickness from the nuclear accident, over 100,000 people were evacuated from their homes to ensure this outcome. Interestingly, official figures show that there have been 2,259 disaster-related deaths (e.g. from maintaining the evacuation) in contrast to the little risk from radiation if early return had been allowed.
The events described above had a profound influence on the entire uranium industry for the balance of the decade.
Ten years before Fukushima, many had started to hope that the time had come for a nuclear renaissance. Fears over nuclear safety following the disasters at Chernobyl and Three Mile Island meant that new nuclear capacity plummeted in the 1990s. Before the earthquake and tsunami hit, Japan had 54 operating nuclear reactors with a capacity of around 47 gigawatts (GW). It was the third largest nuclear power- generating country after the U.S. and France. Japan lost 10GW of nuclear capacity instantly when the earthquake hit, shutting down facilities at Fukushima, Onagawa, and Tokai. The serious damage to the Fukushima Daiichi plants in the accident meant that all six of its reactors were officially decommissioned. In the ensuing months, Japan proceeded to take all of its nuclear reactor fleet offline. Japan was left with a gaping hole in its energy mix.
The sudden loss of over 10% of the world’s nuclear generation ushered in an almost 10-year-long uranium bear market
Counterintuitively, in the wake of the accident the producers kept producing, living off their existing long-term contracts in place. Additionally, a colossal source of new supply was emerging with the recent arrival of Kazakhstan’s Kazatomprom (LSE: KAP) – which became the world’s largest producer in 2009. This state- owned operation benefited from both the most economical method of extraction (In Situ Recovery, “ISR”) and its ever-weakening local currency, the Kazakh Tenge.
There is a recurring pattern in commodities – it follows the “boom-bust” cycle that accompanies strong demand followed by an increase in production only to fall victim to contracting economic growth in the midst of excess supply. The cycle is self-correcting, however; low prices eventually choke off supply, and so goes the expression, “the cure for low prices…is low prices.” As described above, the last uranium cycle was amplified by a very specific idiosyncratic event: the aforementioned Fukushima Daiichi disaster of March 2011 which had a profound effect upon the uranium sector in terms of a sudden and unexpected drop in consumption and abrupt changes in former national pro-nuclear energy policies.
The dramatic expansion of Kazakhstan’s ISR production ramp-up of the last decade and resultant “cheap pounds” further exacerbated the situation in terms of excess annual uranium production over demand.
For other worldwide uranium producers, this low-cost new source of production, accompanied by plummeting prices, severely impacted investment in uranium exploration. Like so many commodities that plunge in price, funds for exploration and development dried up as corporate budgets were tightened. Worldwide expenditures on exploration and mine development imploded from US$2B/yr. to US$500M/ yr. over the period 2014- 2018. It bears mentioning that the uranium cycle was also adversely impacted by several other sector-specific anomalies that further elongated the price recovery process, including both enrichment underfeeding and uranium supply that arose from the Megatons to Megawatts (MTMW) nuclear warhead decommissioning programme… both added significant “secondary supply” into the already oversupplied market.