TORONTO Japan's battle to avert a full-scale meltdown could damage the global nuclear energy industry, derailing plans to build dozens of new power plants and forestalling any surge in demand for uranium to fuel them.
The worst nuclear accident since the 1986 Chernobyl explosion could trigger a sharp drop in shares of nuclear plant builders such as General Electric (GE.N), its Japanese partner Hitachi (6501.T) and France's Areva CEPFi.PA as investors reconsider the possibility of a renaissance for the industry.
Likewise, Canada's Cameco (CCO.TO), Uranium One UUU.TO and other uranium producers could tumble when stock markets open on Monday.
Fresh interest in nuclear power as an alternative to expensive fossil fuels has boosted spot uranium prices by more than 50 percent since July and sent uranium equities soaring. Investors are likely to reverse some of those gains as a result of the unfolding crisis in Japan, analysts said.
"If there is a nuclear accident," said Salman Partners senior mining analyst Raymond Goldie, "it would certainly provoke a global sentiment against nuclear power, and that would certainly affect the long-term demand for uranium."
Shares of Australia's top uranium miners -- some of the world's biggest -- fell sharply when trade opened in Sydney on Monday. Energy Resources of Australia (ERA.AX), a unit of Rio Tinto (RIO.L) (RIO.L), fell 9.5 percent in early trade while shares of Paladin (PDN.AX) dropped 11 percent.
Meanwhile, engineers in Japan were pumping seawater into damaged nuclear reactors to prevent a catastrophic full-scale meltdown, but major damage probably has already occurred and the plants won't operate again, experts said.
While Japanese authorities appear to have prevented a worst-case scenario from unfolding, the political impact of the crisis was already hitting home in the United States.
Senator Joe Lieberman, who chairs the U.S. Senate's homeland security panel, said on Sunday the United States should "put the brakes on" new nuclear power plants until the impact of the incident in Japan became clear.
The United States currently has 104 nuclear reactors operating, and analysts expect four to eight new reactors to be built. In 2008, there were more than 30 reactors in the planning stage -- most of which fell prey to the economic downturn.
"The nuclear renaissance was on the rocks in any case," said Peter Bradford, a former commissioner on the U.S. Nuclear Regulatory Commission. He served on the commission in 1979 during the Three Mile Island accident in the U.S. state of Pennsylvania.
Bradford said a video of the explosion that destroyed a structure at the reactor at Japan's Fukushima complex would have a deep impact on the world's perception of nuclear power
"It's going to be difficult to erase that from people's mental image of nuclear power for a long time," he said.
But industry advocates were quick to call for calm.
"It's probably a little premature to draw conclusions from what's going on in Japan," said Mitch Singer, a spokesman for the U.S. Nuclear Energy Institute. "Even the most seriously damaged of the ... reactors has not yet released radiation at a level that is dangerous to the public."
RECONSIDERING A RENAISSANCE
Even so, the perception of the industry is likely to suffer a severe setback, analysts said.
In 2007, GE combined its nuclear ventures with Hitachi (6501.T) on expectations of a nuclear renaissance in the coming years. The prevailing view was that concerns about carbon dioxide emissions and rising oil prices would push the world to look more favorably on nuclear power generation.
While the nuclear business is still just a small piece of GE's massive portfolio, investors could knock down its share price. The conglomerate built the Fukushima Daiichi Unit 1 reactor, where there was an explosion and radiation leak after Friday's quake and tsunami.
The backlash could also send shares of Cameco and Uranium One down sharply, after the uranium producers rose 55 and 100 percent, respectively, over the past eight months as investors bet on growing global demand for nuclear fuel.
The shutdown of 11 of the 54 operating reactors in Japan will likely depress the short-term market for uranium, with the country deferring deliveries and leaving producers with a surplus. The situation will only worsen as investor confidence sours on the overall future of the industry, pushing spot prices further down.
CHINESE PLANS MAY NOT CHANGE
While the incident could hurt nuclear roll-out in the United States and Japan, China and India are expected to push forward with plans to increase their nuclear footprint as they look to expand power sources to fuel rapid urbanization.
China plans to boost its nuclear generation from about 11 gigawatts a year to at least 80 gigawatts by 2020. The Asian nation has 50 reactors in the planning stage.
Current global demand for uranium is 180 million pounds a year, of which 140 million pounds comes from mine production. The rest is filled by stockpiles and downgraded weapons-grade uranium, according to Cameco.
China alone will need up to 60 million additional pounds a year if it is successful in its roll-out.
While analysts don't expect China to back down due to the situation in Japan, the Asian nation will face increased pressure to make sure its new reactors meet the highest safety standards.
"I would hope that since China is in an earthquake zone as well, that these events provoke the Chinese to install more safety precautions," said Salman Partner's Goldie.
The situation is less clear in India, which has plans to double its nuclear output over the next 10 to 15 years, but already faces massive bureaucratic delays in developing atomic power.
The Japanese quake could also slow Brazil's plans for new nuclear power generation to help meet growing demand -- and prevent a repeat of recent blackouts.
"Nuclear power has gained traction in Brazil because it has less climate impact than fossil fuel generation, but this accident in Japan could renew environmental opposition to nuclear," said Adriano Pires, an energy expert at the Brazilian Centre for Infrastructure.
While the full impact of Japan's nuclear accidents remain to be seen, opponents say that the risk has been made clear enough to force most governments to reconsider plans to build out nuclear capacity.
"This is what you would call a show-stopping event," said Robert Alvarez of the Institute for Policy Studies, who is an opponent of nuclear power development globally.
"At a minimum, I think there's going to be some reappraisal about the degree to which countries want to pursue a nuclear future."
(Reporting by Scott Malone in Boston, Bernie Woodall in Detroit, Matt Daily in New York, Nicola Groom in California and the Brazil bureau; Editing by Frank McGurty)
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