It wasn’t surprising that the Australian dollar regained parity with the greenback yesterday afternoon, as reports from Japan on the continuing nuclear power station crisis improved.
The dollar rose from 99.59 USc at the close in New York early Saturday to around $US1.0019 yesterday in local trading and $US1.0048 in US dealings.
The Canadian dollar also rose for the same reason, the easing of tensions in Japan around the stricken Fukushima reactor complex.
All the doom and gloom reports in the media and from some analysts disappeared as well as the Australian currency rose.
As well there is more positive news from the clean up of the extensive damage caused by the quake and tsunami, even though around 22,000 people are now known to have died or are missing.
The fears have eased about the potential fallout from the six reactors at the Fukushima power station complex northeast of Tokyo.
Not even the bombing and fighting in Libya could halt the Aussie currency’s rise because unlike Japan and other countries we (as is Canada) are a major energy supplier.
Oil prices and gold rose, while markets in Europe and the US jumped, especially Wall Street.
So higher oil and energy prices will be positive for Australia on the whole, especially in the medium term with Japan expected to lose its enthusiasm for new nuclear power stations.
That has been recognised by Fitch Ratings which yesterday said that the problems at the Fukujima nuclear power plant could lead to a boost in Japanese demand for Australian thermal coal.
Fitch also says increased Japanese demand for liquefied natural gas (LNG) could support additional LNG trains at the Browse and Pluto basins, both offshore from northwest Western Australia.
(Which would be good news for Woodside)
Fitch said that extra electricity needs would be met by coal and fuel oil-fired generation in the short term as Japanese gas-fired plants possessed little spare capacity.
"Japanese gas-fired electricity generators were operating at high capacity prior to the earthquake and have limited ability to further increase production," Fitch director of energy and utilities Arnon Musiker said.
"This will limit the increase in demand for spot LNG cargoes."
Fitch estimates Japan lost 11 gigaWatts of nuclear-fired baseload energy after an earthquake and tsunami that sent Japan’s nuclear reactors offline.
Fitch’s said its analysis indicates that only the Japanese coal and fuel-oil fired generators have sufficient capacity to substantially increase electricity production.
This suggests that Japanese demand for Australian thermal coal may increase significantly over the next two to three years. (Japan is the largest export destination for Australian thermal coal with more than 60 million tonnes shipped last year).
Fitch said gas-fired generation is the likely choice for new capacity given its relatively low carbon emission intensity and speed of construction.
Moreover, the Japanese LNG import network appears to have spare capacity for additional imports and was reported as undamaged by the International Energy Agency after the earthquake and subsequent tsunami.
"Fitch believes that Japanese utilities will seek to maintain a policy of diversifying gas supply, which could result in sufficient support for one to two new LNG trains in Australia."
The replacement of Onagawa, Fukushima, Daichi and Daini nuclear reactors with gas-fired generation could increase LNG demand by nine million tonnes per annum, Fitch said.
Woodside Petroleum Ltd’s Pluto LNG project in WA and Origin Energy’s joint venture Asia-Pacific project in the Bowen and Surat basins in Queensland were likely to benefit, subject to securing gas reserves.
"Moreover, the Japanese LNG import network appears to have spare capacity for additional imports, and was reported as undamaged by the International Energy Agency after the earthquake and subsequent tsunami," Fitch said.
Fitch says one additional LNG train would be required for every five gigaWatts of nuclear generation capacity that is replaced by gas.
"If the outcome of the reviews leads to widespread cancellation of new nuclear capacity, there could be sufficient demand for Australian LNG to support those projects that are not yet fully contracted," Mr Musiker said.
So there’s a big list of stocks. Macarthur Coal, Gloucester Coal, Whitehaven and New Hope are among those favoured by many investors.
