Fukushima - Some Background and Intra-day Markets

Just some information I found interesting and/or useful in assessing the impact of japan's nuclear problems.









From Stratfor:

The nuclear reactor situation in Japan has deteriorated significantly. Two more explosions occurred at the Fukushima Daiichi nuclear power plant on March 15.

The first occurred at 6:10 a.m. local time at reactor No. 2, which had seen nuclear fuel rods exposed for several hours after dropping water levels due to mishaps in the emergency cooling efforts. Within three hours the amount of radiation at the plant rose to 163 times the previously recorded level, according to Japan’s Nuclear and Industrial Safety Agency.

Elsewhere, radiation levels were said to have reached 400 times the “annual legal limit” at reactor No. 3. Authorities differed on whether the reactor pressure vessel at reactor No. 2 was damaged after the explosion, but said the reactor’s pressure-suppression system may have been damaged possibly allowing a radiation leak. After this, a fire erupted at reactor No. 4 and was subsequently extinguished, according to Kyodo. Kyodo also reported the government has ordered a no-fly zone 30 kilometers around the reactor, and Prime Minister Naoto Kan has expanded to 30 kilometers the range within which citizens should remain indoors and warned that further leaks are possible.

Chiba prefecture, to the east of Tokyo and connected to the metropolitan area, saw levels reportedly two to four times above the “normal” level. Utsunomiya, Tochigi prefecture, north of Tokyo, reported radiation at 33 times the normal level measured there. Kanagawa prefecture, south of Tokyo, reported radiation at up to nine times the normal level. Finally, a higher than normal amount was reported in Tokyo. The government says radiation levels have reached levels hazardous to human health. Wind direction, temperature, and topography all play a crucial factor in the spread of radioactive materials as well as their diffusion, and wind direction is not easily predictable and constantly shifting, with reports saying it could shift west and then back eastward to sea within the next day. It is impossible to know how reliable these preliminary readings are but they suggest a dramatic worsening as well as a wider spread than at any time since the emergency began.

Full post here:  Red Alert: Radiation Rising and Heading South in Japan | STRATFOR

Fukushima vs Chernobyl:

The Chernobyl accident was the product of human error when a test was poorly executed, while the Japanese failure was triggered by an earthquake and tsunami.

Most importantly, thick containment walls at the Fukushima Daini plant shield the reactor cores so that even if there was a meltdown of the nuclear fuel it's unlikely to lead to a major escape of dangerous radioactive clouds into the atmosphere.

At Chernobyl, there was no containment structure. "When it blew, it blew everything straight out into the atmosphere," said Murray Jennex of San Diego State University.

The most severe contamination occurred within the so-called Exclusion Zone, a circular area around the power plant with a radius of 30 kilometers (19 miles) that has been deemed unsuitable for living and is closed to unsanctioned visitors. 

Fukushima vs Three Mile Island:

Three Mile Island:  About half the reactor core in one unit at the Three Mile Island plant in Pennsylvania melted due to the loss of coolant. The other unit suffered no damage and still operates today.  The plant did vent a small amount of radiation to release pressure but nuclear experts said that release did not result in radiation levels beyond what environmental regulations allow.  Operators at Three Mile Island stopped the meltdown by restoring cooling water to the reactor core.

Looking at all three nuclear accidents, thus far Fukushima is more closely related to Three Mile Island than Chernobyl, but the situation continues to deteriorate.  The situation is now deemed more dangerous than Three Mile Island (a 6 out of 7 versus 3MI's 5).


Known radiation levels:

(Reuters) The International Atomic Energy Agency (IAEA), citing information it had received from Japanese authorities at 0350 GMT, said on Tuesday dose rates of up to 400 millisievert per hour have been reported at the Fukushima power plant site. It did not give details or comparisons on the radiation level but exposure to over 100 millisieverts a year is a level which can lead to cancer, according to the World Nuclear Association. The Vienna-based IAEA uses the unit to measure doses of radiation received by people.

Okay, now the money part (of course, in no way minimizing the impact of this tragedy):

 So, what are the markets doing on this:  puking risk!

iShares MSCI Japan Index (EWJ):

SPY:

The Yen:  The yen rose against all of its major counterparts as risk inJapan of radiation leaks from crippled nuclear power stations boosted speculation that insurers will repatriate assets to pay for earthquake damages.

Risk off means risk free (in theory - not mine) rallies:

7s and 10s are enjoying some popularity here.  I would love to short tens here, but stepping in front of freight trains can, at times, lead to severely adverse consequences.

Is this overdone?  It is anyones guess.  The broad based sell-off of just about anything (except, of course, Netflix) may present opportunities, but a full scale meltdown will kick the market in the chops.  I am sidelined for now.