Email of the day (1 & 2)
Comment of the Day

March 28 2011

Commentary by David Fuller

Email of the day (1 & 2)

On Japan, from Japan (received last Friday evening but withheld until today for reasons mentioned below):
"I hope you find these attachments as interesting as I did. The tables and the quotes in the mining survey are well worth a look and the PIMCO article is one of the most sensible articles that I have read about Japan.

"It is of course hard to be objective when you are close to the action, but things are not looking good here in Japan (I live in Kanagawa, south west of Tokyo). I am following things very closely which is probably not particularly healthy, but I don't believe in burying my head in the sand. I do not think the media, especially the foreign media are doing a very good job of reporting on the Fukushima nuclear situation. The government/Tepco are clearly managing the news flow to a certain extent which is understandable as they do not want people to panic, but even the IAEA has complained about the lack of information. People are behaving very calmly by the way (no salt eating or overdosing on iodine pills). However, if you simply pay attention to the facts (radiation readings, heat readings, contamination of the water supply etc...), the situation is quite alarming. I am not concerned for my own wellbeing or my family's as I live 300 km away from the plant, but even this distance away, radiation levels have been 20 times higher than normal and there are traces of iodine 131 in our water, albeit harmless amounts. Radiation levels 1,600 times normal have been recorded just outside the exclusion zone and it was reported that people outside the exclusion zone could have already been cumulatively exposed to 100 millisieverts of radiation.

"America and Britain have advised their citizens not to go within 80 km of the plant so there has been some discussion about whether the evacuation area should be widened. However, as 2 million people live in this area, even if they were in danger, it would simply not be possible to move them. Where would they go? There are already 500,000 homeless from the Tsunami. In addition to this, major roads and railway lines which pass through this area would be cut off which would severely impede, if not put a stop to, relief efforts. Therefore if the exclusion zone is widened, it would mean that things have got very bad indeed. It is also worrying that because the spent fuel rods were stored in the reactor buildings, there is vastly more radioactive material (including plutonium) here than there was at Chernobyl. Radiation is clearly leaking and when the wind blows this way, it finds its way to Tokyo and beyond.

"Whatever happens, Japan will continue to use atomic power. We have rolling power cuts at the moment which are extremely disruptive so closing all the nuclear plants is out of the question. This is another reason why, the government will continue to play down the risks. It is quite possible that this will continue as a slow burn, stealth disaster without any spectacular meltdowns or further explosions and that eventually they will get things under control. But there is no sign that they have control of the situation yet so I would not discount the possibility that things could get a lot worse. I am not going anywhere and I doubt if I will be collecting the free iodine pills which the British Embassy is handing out, but the situation is worrying.

"I think Fullermoney has done a terrific job of covering of the situation in Japan and I commend you for including some of the more optimistic articles, but i think the situation could be a little more serious than some of these writers realize. I do not want to alarm anyone and this is just my interpretation of the situation, so even if you were inclined to do so it might be better not to publish this email.

"Thank you for all the splendid work you do.

David Fuller's view I replied immediately with these comments in italics:

Thank you so much for this detailed email. It is very thoughtful of you.

As I am just about to dash home for the weekend, I just wanted to say that your comments sound very realistic to me. The initial articles that we received were too optimistic - in hope rather than to mislead. Therefore I would like to post your email on Monday, but only with your permission, and I note your reservations below.

I would not change it, as your views strike me as measured, candid and analytical.

I can barely imagine how stressful this has been for you and everyone else in Japan. I also greatly admire the quiet dignity shown by so many people who have suffered so much during these tragic events.

I received this reply on Sunday:

"Thank you for your reply and your encouraging words. Of course for people here in Kanto, the inconveniences caused by power cuts, limited shortages of certain items, and radiation fears are nothing compared to the suffering of the poor people in the north. I trust your judgement so you are welcome to post part or all of the email. By the way, I do not think your commentary has been at all misleading and I agree with you that all this will lead sooner or later to a weaker yen, although Mr Shirakawa, if we are to believe what he says, seems to favor a strong currency (interview attached, see pages 10-11 for comments on currency)."

My comment - Thanks for your reply and I have posted your earlier email in full. Thanks also for the WSJ interview with BoJ Governor Masaaki Shirakawa. It is fascinating and I agree with your assessment. However I note that he was interviewed on 25th February, before Japan's triple disaster and the yen's additional surge to a new all-time high against the USD (historic, weekly & daily).

Whatever he or anyone else felt before these tragic events, the situation is vastly different today. We know that the BoJ was part of multilateral intervention to weaken the yen on 18th March, which has had some success. Based on the history of other multilateral interventions and the seriousness of Japan's problems in the north, I do not doubt the willingness of CBs to intervene again, if required, until the yen has established a downward trend.

Regarding the Fukushima nuclear problems, any rational person with an ounce of compassion will have hoped from the beginning that damage to the reactors would soon be contained. However hoping does not necessarily make it happen and there has been little respite in the dangerous trend with which radiation leaks have continued and in some instances increased.

This has now contaminated both food and water supplies in the region. Future agricultural production is now threatened in the three adjacent prefectures of Fukushima, Ibaraki and Miyagi, which combined produced approximately 15 percent of Japan's rice, in addition to milk and vegetables. Since radiation leaks at the damaged Fukushima reactors have yet to be contained, no one knows the extent to which agricultural land and the residential area will be affected, or for how long the contamination will last.

What are the implications for the nuclear power industry worldwide?

Fukushima is obviously a big setback for the nuclear power industry, even though the reactors damaged by the most daunting and unusual circumstances were very old and therefore out of date. All countries with nuclear reactors currently in operation or planned will conduct safety and feasibility studies and weigh the evidence from Fukushima where problems have yet to be contained. And so they should.

Thereafter, policy responses are likely to vary considerably. Logically, it makes no more sense for countries to abandon permanently nuclear power, than it would have for our distant ancestors to have abandoned fire, even though accidents burned down houses and even cities, killing vastly more people than are every likely to be endangered by nuclear power in the 21st century.

However, in our western democracies politicians usually follow opinion polls, rather than attempt to lead the debate and formulate public opinion. Nuclear power now faces a visceral backlash, as I mentioned last week. This can only result in fewer reactors being maintained, reconditioned or built from scratch than plans indicated only a few weeks ago.

In contrast, while developing (progressing) economies will also review their plans, I think most will proceed with nuclear power development, led by China and India. Governments in most of these countries will be far less influenced by focus groups or anti-nuclear greens, and more concerned about energy security to maintain the rapid GDP growth required to lift more of their large populations out of poverty and into the middleclass.

If I am right on these projections then the West will fall behind on nuclear power technology, France excepted. China aims to be a leader in this technology and India is unlikely to be far behind. The article below from Bloomberg indicates that China is already leading in the field of Pebble Reactors.

Meanwhile, I expect uranium miners to go a little lower before they eventually move higher. Those of us who hold on will have to be patient

Back to top