GLOBAL uranium demand is set to rebound as Japan's nuclear reactors are gradually switched back on by the new Liberal Democratic Party government, elected over the weekend.
Greg Hall, managing director of junior Toro Energy, said Japan had been spending an additional $US100 million a day on extra coal, oil and gas, which represented a "very, very high cost".
After the weekend's election, he said the country now had the political will to restart its reactors. A new independent safety authority would be in place by April and Japan's nuclear power capacity would be restored through 2013-15.
Shares in uranium producers Paladin Energy and Rio Tinto's Energy Resources Australia surged on Monday - by 8 per cent and 5 per cent respectively - and the spot price of uranium oxide neared $US44 a pound.
Paladin Energy chief John Borshoff predicted Germany, too, would eventually return to the nuclear power fold. "Germany can't survive on a no-nuclear basis with all the countries around it pouring electricity into the country. How could Japan survive as an island country?"
Mr Borshoff said it was impossible for Japan to do without 27 per cent of its electricity-generating capacity. "We've been working on the basis the nuclear programs will resume in some modified form. Germany have set an irreversible path but I believe in eight-10 years they'll be back on the drawing board."
UBS resources analyst Glyn Lawcock welcomed the Japanese news saying it had been a "torrid" 18 months for uranium markets since the closure of the Fukushima Daiichi reactor after last year's Japanese earthquake and tsunami.
Japan shut its fleet of 54 reactors in the wake of the partial meltdown, causing power shortages and a rise in energy prices as coal, oil and gas made up the shortfall.
Spot uranium prices fell from their pre-Fukushima level of about $US65/lb to a low of $US40.80 in November and have recovered somewhat since.
Mr Lawcock said until recently investors had been concerned that Japan, which had deferred some deliveries of uranium as stockpiles rose, would turn around and become a net seller into the world market. Paladin was better placed than ERA to benefit, he said, because three-quarters of its output would be sold at prices linked to a rising spot market.
UBS commodities analyst Tom Price said the Fukushima Daiichi reactor was one of Japan's oldest and slated for closure within two years. "Fukushima was a genuine tragedy but nuclear is a genuine alternative for baseload power stations to coal, and relatively cheap, once built," he said.
The indefinite deferral of BHP Billiton's Olympic Dam expansion, and the re-election of the LDP in Japan, were "two bull points" for the uranium price and UBS was forecasting a recovery to $US50/lb in 2013, and $US55/lb in 2014 and a long-term price of $US65/lb, he said.
Toro Energy is expecting a decision this week from federal Environment Minister Tony Burke on its 100 per cent-owned Wiluna uranium mine in Western Australia. Toro shares were unchanged on Monday at 11.5¢.