Japan’s nuclear hurdles to have knock on effect on oil imports



Japan’s latest obstacles to getting its nuclear power industry back on track will have a knock-on effect on its energy imports in the coming year.

The country had been making progress towards restarting its 43 nuclear reactors, all of which were shut down following the “triple disaster” in 2011, when an earthquake and tsunami led to the meltdown at the Fukushima-Daiichi plant. It was the worst nuclear accident since Chernobyl in Ukraine.

The latest setback to the government’s efforts is opposition to the experimental Monju fast-breeder reactor in Tsuruga, Fukui Prefecture, where residents have sued the Nuclear Regulation Authority to have its permit cancelled because of safety concerns, Japanese news agencies reported yesterday.

The aim of the Monju plant is to move Japan closer to being self-sufficient in nuclear fuel and accelerate the restart of its nuclear fleet. While previous legal challenges to Monju have been overcome, public faith in the nuclear industry has plummeted after Fukushima resulting in a growing protest movement.

Before Fukushima, nuclear power supplied about 27 per cent of Japan’s electricity needs and it had been on track to reach 40 per cent by 2017, according to the World Nuclear Association.

The loss of nuclear power over the last few years has cost Japan dearly in additional fossil fuel imports, which had been in structural decline before the disaster.

Japan had to spend an additional US$270 billion for fossil fuel imports in the three years after the Fukushima accident, or 58 per cent more than in the three years before the disaster, according to the Ministry of Economy, Trade and Industry (Meti).

The country is the world’s third-largest oil importer, after the US and China, and is the single most important buyer of oil from the UAE, which accounted for about 20 per cent of Japan’s oil imports of 4.3 million barrels per day last year.

So far, only two nuclear reactors – at the Sendai plant in Kagoshima Prefecture – have been restarted.

The next test for the industry will be the Takahama plant, also in Fukui, where residents have played a legal cat-and-mouse game all year to keep the two reactors from restarting.

The operator, Kensai Electric, Power plans to restart them at the end of January but is still awaiting a final court ruling on an injunction.

With nuclear offline, Japan’s imports of liquefied natural gas reached a record 86 million tonnes last year. But Meti forecast in September that would drop to 62 million tonnes a year by 2030, assuming the nuclear fleet was restarted.

Such a sharp decline in demand from the world’s largest LNG importer would be bad news for an already heavily oversupplied Asian LNG market. Any slowdown in the nuclear restart would be a reprieve.

amcauley@thenational.ae

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THE LIGHT

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Jewel of the Expo 2020

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T20 World Cup 2020, Australia

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Four reasons global stock markets are falling right now

There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:

1. Rising US interest rates

The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.

Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”

At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.

2. Stronger dollar

High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.” 

3. Global trade war

Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”

4. Eurozone uncertainty

Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.

Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”

The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”

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Pearls on a Branch: Oral Tales
​​​​​​​Najlaa Khoury, Archipelago Books

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