Global Uranium Supply and Demand
Author: Toni Johnson, Staff Writer
November 2, 2007
Introduction
Discerning Supply and Demand
Market Forces
Uranium Mining
Megatons to Megawatts
Enrichment Services
Security Concerns
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Introduction
Interest in the use of nuclear power is on the rise, as the world’s growing demand for cheap, reliable electricity vies with the need to reduce air pollution. Nonproliferation of weapons and the safe disposal of spent nuclear fuel dominate the debate on nuclear power, while nuclear fuel supplies have garnered little attention. Russia and Europe, currently shut out of the normal U.S. nuclear fuel market, want to sell directly to U.S. utilities, raising concerns about the U.S. enrichment industry. Meanwhile uranium mining is making a comeback after a two-decade slump, but obstacles such as infrastructure problems, stable access to enrichment services, and environmental concerns continue to dog the industry.
Discerning Supply and Demand
Close to five million tons of naturally occurring uranium is known to be recoverable. Australia leads with more than one million tons (about 24 percent of the world’s known supply), followed by Kazakhstan, with over 800,000 tons or 17 percent of known supplies. Canada’s supplies are slightly less than 10 percent of the world’s total, while the United States and South Africa have about 7 percent each.
In a 2006 background paper (PDF), the German research organization Energy Watch Group notes the overall amount of uranium is less important than the grade of uranium ore. The less uranium in the ore, the higher the overall processing costs will be for the amount obtained. The group contends that worldwide rankings mean little, then, when one considers that only Canada has a significant amount of ore above 1 percent—up to about 20 percent of the country’s total reserves. In Australia, on the other hand, some 90 percent of uranium has a grade of less than 0.06 percent. Much of Kazakhstan’s ore is less than 0.1 percent.
Currently, there are nearly one thousand commercial, research, and ship reactors worldwide, more than thirty are under construction, and over seventy are in planning stages. The world currently uses 67,000 tons of mined uranium a year. At current usage, this is equal to about seventy years of supply. The World Nuclear Association says demand has remained relatively steady because of efficiency improvements, and it is projected to grow “only slightly” through 2010. However, more efficient nuclear reactors, such as “fast-reactor” technology could lengthen those supplies by more than two thousand years. Experts say spent fuel can be reprocessed for use in reactors but currently is less economical than new fuel.
Market Forces
The uranium market experienced significant declines through the 1980s and 1990s because of the end of the Cold War arms race as well as a cessation in construction of new nuclear plants. Disarmament of nuclear-weapons stockpiles added surplus weapons-grade uranium to the market leading to a price drop as low as seven dollars a pound. Much of the fuel currently powering U.S. reactors, for instance, was meant for the United States in a very different way—sitting in warheads atop Soviet ballistic missiles.
According to a Brinkley mining report (PDF), by 2000 the uranium industry had made no significant uranium discoveries in a decade and only supplied about half of global demand. A series of events, including reductions in available weapons-grade uranium, a fire at Australia’s Olympic Dam mine, significant flooding in Canada’s Cigar Lake mine and the need for fuel at power plants that extended their licenses, caused significant increases in uranium prices in the last few years. Recent prices have been as high as $138 a pound. However, analysts say the uranium market also can be difficult to predict because many transactions are not transparent.
Some experts worry that the lagging uranium industry, in need of more manpower and infrastructure upgrades, will cause delays in the expansion of nuclear power. “Just as large numbers of new reactors are being planned, we are only starting to emerge from 20 years of underinvestment in the production capacity for the nuclear fuel to operate them,” says Thomas Neff, a nuclear energy expert at MIT’s Center for International Studies.
Currently, there are nearly one thousand commercial, research, and ship reactors worldwide, more than thirty are under construction, and over seventy are in planning stages.
India, which is locked out of the world uranium marketbecause of its nuclear weapons program, has shut down five of its seventeen reactors due to a shortage of nuclear fuel. The controversial nuclear deal with the United States would have helped India obtain more nuclear fuel, but is now imperiled by domestic opposition in India.
Uranium Mining
More than half the world’s uranium-mining production comes from Australia, Kazakhstan, and Canada. Experts say Kazakhstan is on track to becoming the largest producer of uranium in the world. Although Australia has the largest supply, access is constrained by a 1982 law that limits uranium mining in the country. Recent increases in uranium demand have sparked debate in Australia, pitting the mining industry and nuclear advocates against environmentalists and activists for indigenous land rights. Other impediments to increases in mining in Australia and elsewhere include the need for infrastructure, environmental concerns, and a lack of experienced workers.
Because of recent high uranium prices, some places are seeing a mining boom despite these obstacles. The United States, for example, has experienced steep rises in mining claims even though almost all of the nation’s identified reserves is of a quality that puts it on the more expensive end of process costs. Going forward, more global exploration to locate uranium—especially ore lower in cost to recover—is expected as long as market prices remain high. Some U.S. miners have expressed concern about how the market might be affected by uranium released from stockpiles held in various forms by the U.S. Energy Department. But Energy department officials assure that the agency would not be a source of market instability.
Megatons to Megawatts
Surplus highly-enriched uranium (HEU), left over at the end of the Cold War, led the United States and Russia to a 1993 agreement—known as Megatons to Megawatts —to turn their weapons-grade material from warheads into nuclear fuel for use in commercial reactors through 2013. Under the agreement, five hundred tons of Russian HEU, equal to about twenty thousand nuclear warheads, was to be “down blended” in Russia with feedstock uranium or low-enriched uranium into about fifteen thousand tons of nuclear fuel that would be shipped to U.S. utilities through the United States Enrichment Corporation (USEC), a nongovernment entity.
As of 2006, about 275 tons of HEU, equal to about thirteen thousand warheads, has been turned into about eight thousand tons of fuel for which the Russian government received more than $5 billion. According to the World Nuclear Association, the military materials supply about 50 percent of U.S. reactor fuel or 13 percent of the world’s total fuel requirements. “The United States is dependent on Russia for a significant portion of [its] nuclear energy. I don’t think a lot of Americans know that,” said Robert E. Ebel a nuclear analyst at the Center for Strategic and International Studies.
Enrichment Services
Although many countries, such as Japan, have enrichment capacity, it is often less than their overall fuel needs, and thus they rely on fuel imports to make up the difference. The United States, Britain, France, Germany, the Netherlands, and Russia currently provide enrichment services for commercial export. Nuclear experts including the International Atomic Energy Agency (IAEA), the UN’s nuclear watchdog, have called for an international enrichment bank designed to prevent countries from losing access to enriched fuel, and deter countries from building their own enrichment facilities. IAEA Director General Mohamed ElBaradei said in 2006 that such a bank would “make sure that every country that is a bona fide user of nuclear energy, and that is fulfilling its non-proliferation obligations, is getting fuel.” Russia recently announced it is creating a new enrichment center in partnership with Kazakhstan that would supply enriched uranium through the IAEA to any country signatory to the Nuclear Nonproliferation Treaty.
The Russian government also contends that the current U.S. enrichment system is discriminatory since the United States imposed a 116 percent “anti-dumping” duty on exports on enriched uranium outside the Megatons to Megawatts program. In September 2007, a U.S. trade court ruled that Russian enrichment was a service, not a good, and sent the case back to the U.S. Commerce Department for review.
Several firms in the United States are considering constructing more efficient enrichment facilities. Nuclear material experts say Russia’s enrichment capacity, which is four to five times current U.S. capacity, could deter investment in U.S. enrichment. “The fear for anyone in the world that wants to build an enrichment plant is what to do if the Russians come,” says a nuclear analyst at the U.S. Department of Energy, of the possibility Russia might grab enough contracts to prevent new facilities from getting a return on their investment quickly.
“The United States is dependent on Russia for a significant portion of [its] nuclear energy. I don’t think a lot of Americans know that.”
—Robert Ebel, Center for Strategic and International Studies
The USEC alone is unable to handle all U.S. demand, and uses gaseous diffusion, an older enrichment technology that is less energy-efficient. Utilities pay a fee based on how much energy is used, which corresponds to how thorough the process is and how much enriched uranium is gained from feedstock. Companies that provide enrichment using more efficient technologies, such the gas-centrifuge technology employed by Russia’s Tenex, can obtain more fuel for less energy, making these companies potentially cheaper alternatives to USEC. Henry D. Sokolski, executive director of the Nonproliferation Policy Education Center, says it sounds like the heavily government-subsidized USEC, hamstrung by the Energy Department on innovation, might be “toast” but hopefully the situation would not “push out other reasonable [U.S.] competitors.”
Security Concerns
The U.S. Energy Department analyst notes that attempts to obtain yellow-cake uranium, which is mined but not yet enriched, is not in itself a cause for security concerns and in many cases is “perfectly legitimate.” What is concerning is any attempts to obtain highly-enriched uranium, he said. Recent stories about sales of weapons-grade material have sparked concern off and on since the end of the Cold War, including an instance in the former Soviet republic of Georgia in January 2006.
Antiproliferation advocates see the spread of enrichment capabilities as a greater worry because it allows the processing of large quantities of raw uranium into weapons-grade materials. Attention currently focuses on Iran, isolated from international fuel supplies due to sanctions over the country’s enrichment activities. The country may have enough uranium domestically to fuel a single reactor but not enough for the ten to twenty they hope to build in the future, experts say. “The idea they are going to sustain anything but a weapons program is ludicrious,” Sokolski contends of Iran’s uranium supplies.
Countries such as Brazil and South Africa also plan enrichment programs but these countries raise less concern. “It comes down to an issue of trust,” says CFR Fellow Charles D. Ferguson, who noted in a recent Council Special Report that the problem “with this view is that today’s good guy can become tomorrow’s bad guy and vice versa.”
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