In the wake of the COP21 climate meeting in Paris, which subtly endorsed nuclear power, and the aggressive move by China to build a nuclear plant a month, the supplies of uranium are once again in the spotlight.
The price of uranium for fuel in nuclear reactors has had a complicated history over the last forty years (see figure below). After the 2011 Tohoku tsunami and Fukushima reactor accidents, uranium prices dropped about 60%, bottoming out near $30/lb in mid-2014. By late 2013, all of Japan’s nuclear facilities were completely shut down.
Other countries also closed nuclear power plants, including Germany and Switzerland. However, reliance on brown coal, and large-scale wind and solar systems, have neither met the climate needs of Germany, nor provided reasonable and stable electricity costs in Japan.
But uranium prices are recovering and the outlook for the uranium market has brightened for several reasons:
- Japan restarted nuclear reactors at the Sendai power plant a few months ago, and about 40 of Japan’s 54 nuclear plants will likely be restarted.
- China’s current and planned construction of nuclear power plants is a good indicator of future uranium demand. Mainland China has 26 nuclear power reactors in operation and 25 under construction, according to the World Nuclear Association, with almost 100 more planned by 2030.
- India is also in the midst of a major expansion of nuclear-power generation. The country's installed capacity is now at 5.7 GW, but that is set to grow to 10 GW in just the next four years, which puts pressure on global uranium demand.
- In the United States, about 90% of our existing reactors will soon be relicensed for another 20 years, many for another 40 years, keeping the United States the biggest producer of nuclear power for at least ten more years until China completes their 100 new units.
However, idling Japan’s reactors for a few years caused Japanese utilities to accumulate about 120 million pounds of uranium since they still had to honor their existing supply contracts. This is enough to fuel its restarting fleet for the next decade.
In fact, according to Jim Ostroff, senior editor of Platts Nuclear Publications, “Japan is swimming - some would say drowning - in uranium.” And this is probably why uranium prices have stayed under $40 a pound.
But while other energy commodity prices, particularly oil, have drastically fallen lately, uranium prices have stabilized. Uranium spot prices are usually driven by production (which is guided by demand) or by inventory (especially excess amounts of uranium from weapons stockpiles that can be blended down for fuel).
As shown in the above figure, for the 20 years following 1980, abundant stockpiles of weapons-grade uranium in the Soviet Union and the United States were blended down for reactor fuel as part of treaties aimed at reducing the number of nuclear weapons. This kept uranium prices, and uranium mining production, low.
When those stockpiles were mostly used up, prices became more volatile. The Fukushima disaster dropped prices again by significantly reducing demand since Japan was the third-largest producer of nuclear energy at that time, behind the United States and France.
However, the price of uranium has little effect on the price of nuclear power since the fuel is such a small part of the total cost and the cost of fuel itself is dominated by the fabrication costs, not the cost of uranium. Decisions to build nuclear power plants do not hinge on uranium supplies. And there are sufficient uranium deposits in the world to provide nuclear energy at any level for many thousands of years.
Eighty-nine percent of the fuel requirements of the current fleet of nuclear reactors worldwide, totaling some 377 million pounds U3O8 (yellowcake), will be met in 2016 by Canada, Australia, and Kazakhstan, with only smaller supplies from other sources.
In contrast, the U.S. will consume more uranium than anyone else in the world, about 50 million pounds of U3O8 in 2016. Yet, we produce less than 5 million pounds domestically. As uranium prices rise, however, more in-situ uranium mines in the U.S. should come on-line. Thirteen states contain known deposits and new discoveries, with Virginia most notable because of a large, recently discovered deposit in that state.
Although China produces only 4 million pounds of U3O8 annually, the country consumes 19 million pounds per year. China’s planned increase in nuclear energy will raise that amount to over 70 million pounds by 2030.
Looking at the uranium picture in total, uranium commodity prices most likely will rise, driving stock prices up, driving new exploration and processing plant construction, and causing new rounds of mergers and acquisitions of uranium properties and their companies.
This was foreshadowed last April during the first India-Canada head-of-state visit in 42 years. In Ottowa, Prime Minister Narendra Modi of India signed a five-year deal to buy 3,000,000 lbs of U3O8 for his country’s reactors, an agreement worth almost $300 million, or about $40/lb U3O8. Oddly enough, this was also the first nuclear contract between these two nations.
So an increase in global nuclear power, led by China, should stabilize uranium prices at somewhere between $40 and $60 per pound in the coming decade. Just in time for a new expansion of nuclear energy and its role in addressing global warming.
For more information on this subject see the I2M Web Portal which monitors the global activities of the uranium, thorium, and rare earth exploration and mining industry. The Portal contains about 5,000 entries drawn from reports, media articles and other sources available on the Internet for use by geoscientists and the general public, and for use during assessment of activities for the independent AAPG Energy Minerals Division’s Uranium Committee on Nuclear and Rare Earth Minerals for the committee’s Annual and Mid-Year reports to the EMD (full disclosure – I am a member of that committee).
I have been a scientist in the field of the earth and environmental sciences for 33 years, specializing in geologic disposal of nuclear waste, energy-related research, planetary surface processes, radiobiology and shielding for space colonies, subsurface transport and enviro...MORE
Dr. James Conca is an expert on energy, nuclear and dirty bombs, a planetary geologist, and a professional speaker. Follow him on Twitter @jimconca and see his book at Amazon.com