Japan 's Fukushima nuclear accident in March has damaged the credibility of the uranium mining industry and will slow nuclear power growth for up to two years, a Rio Tinto PLC (RIO) executive said Thursday.

Andy Lloyd, chief development officer for Rio Tinto's uranium unit, said it will take time for nuclear power producers to address the safety and design issues learned from Fukushima . "We continue to believe that will slow down the industry for a few years; a year or two, we'd hope," Lloyd told a nuclear power seminar.

But he expects nuclear growth to eventually resume, "driven by China , especially". The medium-term outlook for uranium, the key fuel for nuclear reactors, remains clouded in the wake of Japan 's atomic energy crisis.

The crisis began in March when explosions crippled the Fukushima reactor complex following the country's devastating earthquake and tsunami. Rio Tinto is a major uranium producer via its majority ownership of Energy Resources of Australia Ltd. (ERA.AU), along with management of the Rossing mine in Namibia .

Macquarie said this week that Japan 's nuclear capacity utilization fell to 26.4% in August, the lowest level recorded, as further post-Fukushima shutdowns came into effect. It compares with 70% utilization rates at the start of the year, the bank said.

"We expect Japan 's uranium demand to drop 36% year-on-year in 2011, which has pushed the ex-China market into surplus despite supply disappointments," Macquarie said.

The spot price of U3O8, the most actively traded compound of uranium, was US$54.00 a pound on September 19, according to U.S.-based UX Consulting Co. This is down from more than US$70/lb in January.

Along with uncertainty about demand, Lloyd said the "high capital cost" of new nuclear reactors may be an issue for the sector as it looks to attract funding in coming years. But China 's current investment in large, new generation nuclear power is "bringing capital costs down, and very rapidly", he said."That is a key trigger for future economics," Lloyd said.

Rio Tinto is a major uranium producer via its majority ownership of Energy Resources of Australia Ltd. (ERA.AU), along with management of the Rossing mine in Namibia .
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