Market dynamics under spotlight at WNFC 2023

Thursday, 20 April 2023

Mandeep Ludu, head of WMC Energy's Nuclear Fuel Group, looked at the evolution of the markets over recent years from the perspective of an intermediary company with nuclear activities including strategy and investment, financing and purchases and sales in U3O8, UF6 and enriched uranium product (and its components).

The nuclear fuel market has entered a new phase since 2020, a phase he characterised as Openness, Maturity, Growth. This comes after the dramatic changes seen in the post-Fukushima period - when prices came down and long-term contracting slowed somewhat, but spot market volumes increased.

Over the past two years, things have changed again, he said, with a lot of volatility, spot volumes growing even more and long-term contracting picking up again, and there has been a "change in psychology" as market participants have learned from the past to be disciplined, and recognising that they need contractual commitments before making significant capital investments to meet demand. "We don't want to deteriorate our own market in the event there is an oversupply situation," he said.

But now, he said, a "tremendous amount of positive nuclear sentiment" has made the demand profile change overnight, thanks to developments including plant lifetime extensions, power uprates and plans for small modular reactors.

Uncertainty and challenges do continue, he said, but working to address these challenges leads to efficiency which will make for a stronger market: "Uranium is always there - it's just a function of price and timing. What's happened over the last couple of years has maybe caught everybody off-guard a little, so maybe it's accelerated discussion that people were planning to have 1-2 years from now but I think the consensus is that new long-term uranium supply is needed before the end of this decade."

EU view

Euratom Supply Agency Director General Agnieszka Kazmierczak presented the most recent data from the Agency which underlined these observations from a European perspective. For the first time in 10 years, 2022 saw EU utilities buying more material than they actually loaded into reactors. This means material is being put into inventory, which helps to ensure security of supply, she said.

Kazakhstan, Niger, Canada and Russia together accounted for some 90% of the deliveries supplied to the EU in 2022. These are the same four countries who dominated supply previously, but the shares coming from the individual countries have changed slightly in quantity terms: the share of uranium from Russia has decreased, but "we would probably need to wait until next year to see if we are seeing a new trend, in reversing the flow from Russia," she said.

The exception to this is EU countries with VVER reactors, where deliveries of Russian-origin uranium increased in 2022, reflecting "bundled" contracts, selling ready-made fuel assemblies which contain Russian material.

Inventories have decreased steadily over the past eight years, but the agency considers that they remain at a "healthy" level for most utilities, and this trend could reverse "pretty soon", Kazmierczak said. However, some utilities hold less than one year of inventory, she said.

Orano remains the main provider of conversion to EU utilities followed by Rosatom, Cameco, and Converdyn. As with uranium, it is too soon to tell if a slight fall in the share of conversion supplied by Russia, from 25% to 22.4%, will be part of a trend. 62% of enrichment supplied to EU customers originated in the EU with 30% of the remainder coming from Rosatom (the origin of the other 8% is unspecified due to commercial sensitivities).

Euratom has analysed expected future requirements for conversion and enrichment over the next 10 years against nameplate plant capacities. "For the EU it looks optimistic, in the sense that … capacity enough should be available to cover the requirements, although we know it's a global market," she said, although the situation for the global west could be tighter. A similar exercise for enrichment, while showing enough capacity for the EU, finds a possible shortfall in capacity for the for requirements of the global west. An increase in overfeeding by enrichers could result in putting more stress on conversion.

Uranium supply "is a question of timing and price"; enrichment capacity "could be modulated"; but conversion "remains, in our view, a bottleneck" in which investment is needed, Kazmierczak said. This would take several years, and need some form of contractual or political commitment, she added.

Enriching the future

Companies often reveal their true selves at times of stress, said Kirk Schnoebelen, head of sales for Urenco and president of the company's North American marketing subsidiary, Urenco, Inc. As the war in Ukraine enters its second year, "we have begun to witness a generational commercial realignment of suppliers and customers" that, in addition to traditional commercial parameters of price quantity and delivery terms, also weighs values and behaviours as never before, he said.

Energy security is based on fuel security, and this is being reflected in the market: energy security concerns are driving a rise in short-term demand for non-Russian fuel supplies, while climate concerns are driving a similar rise in long-term demand.

Urenco has the possibility to respond to increases in demand both by adding new centrifuge capacity at its sites and the flexibility to resume production from existing excess capacity which has for many years been used for underfeeding (operating enrichment plants at a lower operational tails assay so that less raw uranium feed is needed). But making the multi-billion dollar investments to expand capacity requires sufficient long-term contracts and regulatory certainty on future Russian supplies to the west, he said.

In answer to questions, Schnoebelen said decisions on installing additional capacity - both for conversion and enrichment - need to be made "soon" to avoid supply gaps. Urenco's order book increased 25% in 2022 alone, and that has allowed the company to consider making such investments, he added. "Later this year, we hope to be able to announce some final investment decisions."

Kazmierczak agreed with Schnoebelen that decisions need to be made "as soon as possible", with the recent declaration at the G7 summit - where Canada, France, Japan, the UK and USA agreed to work together to ensure stable fuel supplies - giving a "political signal" in this direction. It is also important to be prepared in case trade sanctions are declared by the USA or EU countries which make trade with Russian companies problematic.

The two-day conference, jointly organised by the Nuclear Energy Institute and World Nuclear Association, took place in The Hague from 19-20 April.