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Uranium Markets

(Updated April 2014)

  • Production from world uranium mines now supplies about 85% of the requirements of power utilities.
  • Primary production from mines is supplemented by secondary supplies, principally by ex-military material and other inventories.
  • World mine production has expanded significantly since about 2005.

All mineral commodity markets tend to be cyclical, ie, prices rise and fall substantially over the years, but with these fluctuations superimposed on long-term trend decline in real prices, as technological progress takes place at mines. In the uranium market, however, high prices in the late 1970s gave way to depressed prices in the whole of the period of the 1980s and 1990s, with spot prices below the cost of production for all but the lowest cost mines. In 1996 spot prices briefly recovered to the point where many mines could produce profitably, but they then declined again and only started to recover strongly late in 2003.

Nevertheless the quoted “spot prices" apply only to marginal trading from day to day and for many years have represented less than 20% of supply. Most trade is via 3-15 year term contracts with producers selling directly to utilities. The contacted price in these contracts is, however, often related to the spot price at the time of delivery. However, as production has risen much faster than demand, fewer long-term contracts are being written.

The reasons for fluctuation in mineral prices relate to demand and perceptions of scarcity. The price cannot indefinitely stay below the cost of production (see below), nor will it remain at very high levels for longer than it takes for new producers to enter the market and anxiety about supply to subside.

Uranium (U3O8) Prices

Graph courtesy of UxC

Note that the Euratom long-term price is the average price of uranium delivered into the EU that year under long term contracts. It is not the price at which long-term contracts are being written in that year.

Demand

About 435 reactors with combined capacity of over 370 GWe, require some 78,000 tonnes of uranium oxide concentrate containing 66,000 tonnes of uranium (tU) from mines (or the equivalent from stockpiles or secondary sources) each year. This includes initial cores for new reactors coming on line. The capacity is growing slowly, and at the same time the reactors are being run more productively, with higher capacity factors, and reactor power levels. However, these factors increasing fuel demand are offset by a trend for increased efficiencies, so demand is dampened - over the 20 years from 1970 there was a 25% reduction in uranium demand per kWh output in Europe due to such improvements, which continue today. 

Each GWe of increased new capacity will require about 150 tU/yr of extra mine production routinely, and about 300-450 tU for the first fuel load.

Fuel burnup is measured in MW days per tonne U, and many utilities are increasing the initial enrichment of their fuel (eg from 3.3 towards 5.0% U-235) and then burning it longer or harder to leave only 0.5% U-235 in it (instead of twice this).

Burnup

Source: Uranium Institute 1992

The graph from Sweden's Oskarsamn 3 reactor shows that with increasing fuel burn-up from 35,000 to 55,000 MWd/t a constant amount of uranium is required per unit of electrical output, and energy used (indicated by SWU) for increased levels of enrichment increases slightly. However, the amount of fabricated fuel used in the reactor drops significantly due to its higher enrichment and burn-up.

Swedish Fuel

In the USA, utilities have pursued higher enrichment and burnups, but in addition have reduced the tails assay from enrichment, owing to higher uranium prices, so that significantly less natural uranium feed is required. However, more enrichment is then needed, so there is a clear trade-off between energy input to enrichment and uranium input.

Enrichment SWU-tails

Because of the cost structure of nuclear power generation, with high capital and low fuel costs, the demand for uranium fuel is much more predictable than with probably any other mineral commodity. Once reactors are built, it is very cost-effective to keep them running at high capacity and for utilities to make any adjustments to load trends by cutting back on fossil fuel use. Demand forecasts for uranium thus depend largely on installed and operable capacity, regardless of economic fluctuations.

Looking ten years ahead, the market is expected to grow significantly. The WNA 2011 Global Nuclear Fuel Market Report reference scenario (post Fukushima accident) shows a 48% increase in uranium demand over 2013-23 (for a 34% increase in reactor capacity – many new cores will be required). Demand thereafter will depend on new plant being built and the rate at which older plant is retired – the reference scenario has a 23.6% increase in uranium demand for the decade 2020 to 2030. Licensing of plant lifetime extensions and the economic attractiveness of continued operation of older reactors are critical factors in the medium-term uranium market. However, with electricity demand by 2030 expected (by the OECD's International Energy Agency, 2008) to double from that of 2004, there is plenty of scope for growth in nuclear capacity in a world concerned with limiting carbon emissions.

Supply

Mines in 2012 supplied some 68,800 tonnes of uranium oxide concentrate (U3O8) containing 58,344 tU, about 86% of utilities' annual requirements. (See also paper World Uranium Mining). The balance is made up from secondary sources including stockpiled uranium held by utilities, and in the last few years of low prices those civil stockpiles have been built up again following their depletion about 1990-2005. At the end of 2013 they were estimated at more than 90,000 tU in Europe and USA, and a bit less in east Asia, mostly in China.

The perception of imminent scarcity drove the "spot price" for uncontracted sales to over US$ 100 per pound U3O8 in 2007 but it has settled back to $34-45 over the two years to April 2014. Most uranium however is supplied under long-term contracts and the prices in new contracts have, in the past, reflected a premium of at lease $10/lb above the spot market.

Note that at the prices which utilities are likely to be paying for current delivery, only one third of the cost of the fuel loaded into a nuclear reactor is the actual ex-mine (or other) supply. The balance is mostly the cost of enrichment and fuel fabrication, with a small element for uranium conversion.

Uranium Mine Production Cost Curve 2010

The above graph, from CRU Strategies, shows a cost curve for world uranium producers in 2010, and suggests that for 53,500 tU/yr production from mines in that year, US$40/lb is a marginal price. The cost curve may rise steeply at higher uranium requirements in 2012 (with production of 58,344 tU, 68,805 t U3O8).

With the main growth in uranium demand being in Russia and China, it is noteworthy that the vertically-integrated sovereign nuclear industries in these countries (and potentially India) have sought equity in uranium mines abroad, bypassing the market to some extent. Strategic investment in uranium production, even if it is not lowest-cost, has become the priority while world prices have been generally low. Russia’s ARMZ has bought Canada-based Uranium One, with 2013 production of over 5000 tU in several countries, and China’s CGNPC-URC has bought a majority share of the large Husab project in Namibia, with potential production of 5770 tU/yr (some to be sold into world markets). China’s SinoU (CNNC) has bought a 25% share in Langer Heinrich in Namibia, giving it over 500 tU/yr. It also has 37.5% of the SOMINA joint venture in Niger, entitling it to over 1800 tU/yr in future, and up to 49% of Zhalpak JV in Kazakhstan, adding another 500 tU/yr.

Supply from elsewhere

As well as existing and likely new mines, nuclear fuel supply may be from secondary sources including:

  • recycled uranium and plutonium from used fuel, as mixed oxide (MOX) fuel,
  • re-enriched depleted uranium tails,
  • ex-military weapons-grade uranium,
  • civil stockpiles,
  • ex-military weapons-grade plutonium, as MOX fuel.

Commercial reprocessing plants are operating in France and UK, and another is due to start up in Japan. The product from these re-enters the fuel cycle and is fabricated into fresh mixed oxide (MOX) fuel elements. About 200 tonnes of MOX is used each year, equivalent to less than 2000 tonnes of U3O8 from mines.

Military uranium for weapons is enriched to much higher levels than that for the civil fuel cycle. Weapons-grade is about 97% U-235, and this can be diluted about 25:1 with depleted uranium (or 30:1 with enriched depleted uranium) to reduce it to about 4%, suitable for use in a power reactor. From 1999 to 2013 the dilution of 30 tonnes per year of such material displaced about 9720 tonnes U3O8 per year of mine production. (see also paper on Military Warheads as a source of Nuclear Fuel).

The following graph gives an historical perspective, showing how early production went first into military inventories and then, in the early 1980s, into civil stockpiles. It is this early production which has made up the shortfall in supply from mines since the mid 1980s. However, the shortfall is diminishing towards the level of continuing secondary supplies.

World Uranium Production and Demand

The USA and Russia have agreed to dispose of 34 tonnes each of military plutonium by 2014. Most of it is likely to be used as feed for MOX plants, to make about 1500 tonnes of MOX fuel which will progressively be burned in civil reactors.

The following graph (WNA 2011 Market Report reference scenario) suggests how these various sources of supply might look in the decades ahead:

Reference Case Supply, tU

Sources:
WNA Global Nuclear Fuel Market Reports.
IEA World Energy Outlook – to date.