By Xan Rice in London

Nearly three years after the Fukushima nuclear accident in Japan, the tremors continue to reverberate through the uranium industry.

Last week Paladin Energy mothballed its Kayelekera mine in Malawi, which has been responsible for about 2 per cent of global supply.

Then Cameco, the world’s third-largest producer of the radioactive metal, followed with more bad news. The Canadian company is scaling back its target of increasing production more than 50 per cent by 2018, citing oversupply and uncertainty in the industry.

“It’s a depressed market at the moment,” says Stefan Ljubisavljevic, an analyst at Macquarie. “Demand growth is very sluggish and inventories are high.”

The miners’ gloom is understandable. In 2007 the spot price of uranium rocketed to $152 a pound. It fell just as quickly during the financial crisis, but recovered to $72 in early 2011, when nuclear power was seen by governments, from Europe to Asia, as a crucial component of the carbon-free energy that would fuel the future.

But then the earthquake and tsunami in Japan led to the meltdown of Tokyo Electric Power’s Fukushima nuclear power plant.

It has been downhill ever since. Last year the spot price tumbled 21 per cent. At $35.75 it hovers around eight-year lows.

Nicolas Carter, senior vice-president at Ux Consulting Company, a uranium specialists, reckons that costs for close to half of global production are above the current price.

Goldman Sachs and Deutsche Bank, which have uranium trading desks and large stockpiles of the material in warehouses, are getting out of the business.

The oversupply can be traced to Fukushima. After the accident Japan shut all 50 of its reactors – 13 per cent of the world’s total at the time. Japanese utilities had three years of uranium stocks, and have since added a further two years of supplies under contractual obligations.

US and European energy companies have two years and three years of supplies respectively.

Meanwhile, production has been increasing, led by Kazakhstan, which accounts for 38 per cent of global production. Canada and Australia are the next two largest producers.

However, with supply being curtailed, the prospects for uranium may be improving.

In a recent report Morgan Stanley says the Paladin and Cameco cutbacks – when added to output reductions by other mining groups – are big enough to start rebalancing the market, and that the spot price of uranium may have “found a floor”.

Much depends on two countries, however. The first is Japan. After heated debate and rigorous safety inspections, the first of its nuclear reactors are expected to restart during 2014.

At the start of the year analysts were expecting about 10 plants to reopen. But there have been more delays and Mr Carter forecasts that only five or six reactors will start up in that timeframe.

While Japanese utilities have no need to buy uranium soon because of their stockpiles, a resumption of nuclear power in the country should give the industry a big boost.

“Having Japan back online will improve the market perception and demand,” Mr Carter says.

The other crucial country is China, which has 15 nuclear reactors and is trying to tackle a huge pollution problem by moving to cleaner energy sources.

Of the 71 nuclear reactors under construction globally, 28 are in China, according to the World Nuclear Association.

Three other countries are expected to drive nuclear growth: Russia, India, and South Korea.

For the biggest miners, which also include Kaz­atom­prom of Kazakhstan, France’s Areva, and ARMZ Uranium One of Russia, the important question is how long prices will take to recover. Energy Resources, an Australian uranium miner controlled by Rio Tinto, said in January that prices might start to rebound only in 2015 or 2016. Beyond that, things look rosier.

Credit Suisse reckons prospects for rising prices during the next three to five years are “very promising”. In a report it forecast an average price of $55 in 2015 and $70 by 2017.

From 2020 on, the bank says there could be “significant and growing deficits”, which could drive up prices further.

Many industry watchers agree. As people in the industry point out, there are 557 nuclear reactors either under construction, planned or proposed globally – more than there were before Fukushima.