Monday, March 24, 2008

Buy Japanese Samuri Sword Makers

As Grandma used to say, if the report is "The sky is falling" the course of action is to short sky.
Conversely, if the report is of shortage, go long of what's scarce. I am a fan of low I.Q. investing.

From Bloomberg:

From a windswept corner of Hokkaido, Japan's northernmost island, Japan Steel Works Ltd. controls the fate of the global nuclear-energy renaissance.

There stands the only plant in the world, a survivor of Allied bombing in World War II, capable of producing the central part of a nuclear reactor's containment vessel in a single piece, reducing the risk of a radiation leak.

Utilities that won't need the equipment for years are making $100 million down payments now on components Japan Steel makes from 600-ton ingots. Each year the Tokyo-based company can turn out just four of the steel forgings that contain the radioactivity in a nuclear reactor. Even after it doubles capacity in the next two years, there won't be enough production to meet building plans.

``If there are 50 to 100 reactors or more to be built, there will be a real shortage and real delays in deliveries, so it's a good hedge to get in line now,'' said Ron Pitts, senior vice president for nuclear operations at the construction and engineering company Fluor Corp. in Irving, Texas.

Pitts estimated the cost of heavy forgings, including reactor containment vessels, steam generators and pressurizers, at $300 million to $350 million for each generating unit. Japan Steel wouldn't comment on the size of the down payment, which Pitts estimated at $100 million.

Right Now

UniStar Nuclear Energy LLC in Baltimore, a venture between Constellation Energy Group and Electricite de France SA, reserved slots for Japan Steel gear in 2006, even though it doesn't expect to complete its first reactor until 2015. It plans to build reactors based on technology from Areva SA of France....

...Japan Steel stock more than doubled from the start of last year to 2,080 yen in July, before dropping, partly because of a plan to issue shares in case of a hostile takeover bid. They now trade at 1,602 yen, valuing the company at 595 billion yen ($5.8 billion). Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo, sold his shares in July....MORE

HT: Environmental Capital