UF6 Conversion: Ordeal or New Deal?

Philippe Canaux

Taking the view of an observer of the UF6 conversion market, one is struck by two surprising things which are occurring at the same time in the world of conversion. Evaluating supply and demand forecasts, and assessing the resulting market situation, are interesting but classical exercises at which all the experts, consultants and analysts excel. And yet the first surprise that one encounters when conducting such an exercise is the wide range of reported figures, showing a basic uncertainty in both supply and demand. The second surprise is that the equilibrium between supply and demand, although obtained by applying the most favourable scenario in 1997, is generally achieved every year. The famous and forecasted gap "vanishes". In this paper I will look at these aspects in more detail, and give Comurhex's vision of the conversion world. Conversion Supply and Demand The purpose of uranium conversion is twofold: to chemically purify uranium concentrates; and to chemically transform those concentrates into uranium dioxide (UO2) or uranium hexafluoride (UF6). Comurhex presently converts natural uranium concentrates, as well as reprocessed uranium (RepU), into UF6. The Demand Various market prognosticators can be used to estimate the gross and the net worldwide demand for conversion. Let us quote the various figures collected for 2000 as an example. Figures for gross demand vary from 53 600 tU (given by TradeTech) to 67 600 tU (according to NAC), showing a spread of 14 000 tU. This is clearly quite a large difference for a situation which will occur as early as 2000, less than three years away. Comurhex's own assessment of gross demand for the next few years is shown in Figure 1. (Please note that these figures have been adjusted to take into account an assumed tails assay of 0.1% for the Russian enrichment plants.) We expect a limited increase until 2005, after which demand should stabilise; we did not make a forecast for beyond 2010, as this would be too unreliable. The difference between the gross and the net demand represents the use of mixed oxide (MOX) and RepU fuel, which represent a real and constant source of supply, despite current speculation. In that respect, decisions regarding the use of MOX and RepU fuel are not so much technical as political. Figure 2 shows our assessment of the use of MOX and RepU fuel over the next few years, in three scenarios. Here also, different figures have been issued by various analysts, showing diverging views on actual demand for MOX and RepU fuel. Figure 3 shows the net demand, ie. after allowing for MOX and RepU fuel. This highlights the wide spread between the various forecasts. The Supply The conventional supply of conversion services seems apparently better known than the demand. However, here again some inconsistencies exist among the prognosticators, owing to various factors: conversion exported by Russia is generally included in low enriched uranium (LEU); nameplate capacity represents a theoretical maximum for production from existing capacity, but actual deliveries can be significantly different, due to changes in inventory, trading, etc.; producers do not commonly disclose their key operational figures. Nevertheless, in Table 1 we present our estimates of the present supply of conversion services from conventional producers. Supply and Demand Relationship Let us then make both ends meet and calculate the resulting supply-demand relationship. Figure 4 shows the supply minus the demand. What does this indicate? The 1997 deficit between supply and demand must have been cleared up; otherwise the unbalanced situation would have resulted in turmoil in the market, a condition which we have not seen develop. In future years, we observe that supply-demand balance does not exist. In fact, there appears to be a deficit amounting to 5000 tU in 2000, 9000 tU in 2005, and 11 000 tU in 2010. It has been commonly assumed that commercial conversion inventory drawdown has played a very significant role in filling the supply-demand gap. But over the years these inventories have been used extensively, and we estimate that not much remains available today. In that respect, we seriously question the inventory figures that are given by some prognosticators. Given this situation, how can supply be assured? How can new quantities of conversion arrive on the market, and from where? Firstly, can we envisage a change in the production capacity of the conventional converters? Let us look at the capacities and production of the converters again (Table 1). Assuming the Western converters do not decide on any increase in capacity until more is known about the market entry of the conversion portion of the deliveries of HEU-derived material from Russia to the USA, the production scenario in the West is reasonably predictable. That is, unless some surprise occurs, or in the event that one producer finds it impossible to continue operating due to market conditions. Russian conversion capacity could be known with more accuracy, including the nameplate and operational capacity, and the current production. We all know that the HEU-derived enriched uranium (DEU) already represents a significant tonnage of conversion entering the market, and that, if current plans proceed smoothly, it will represent approximately sufficient to fill the gap between supply and demand. Thus, one way to fill the gap is to rely on the DEU. But that should not lead to complacency. Although the recently announced agreement in principle between Cogema, Cameco and Nukem Inc. and Russia for the sale of the DEU (including the conversion component) has brought some clarification and reduced the uncertainties surrounding the market entry of this material, the DEU situation is still inherently unstable. Let us examine why we think the supply of DEU is inherently unstable. Marketing of the DEU To look at the DEU let us proceed step by step, raising some questions and then assessing what is still uncertain and what can now be considered as more reliable. Let us first consider the quantities. The theoretical delivery schedule is well known, resulting from the sum of the surplus US material and deliveries under the US-Russia HEU Agreement (Figure 5). But the first question is, will this come true? The raw material certainly exists, but nevertheless we should still consider as uncertain the pace of the deliveries and the number of years over which those deliveries will be made. We obviously link such uncertainties to the risks emanating from the political arena, from military needs and expectations, and from regulatory burdens and governmental interference. We have made a first attempt at an assessment of delivery scenarios (Figure 6), based on realistic HEU dilution capacities (but disconnected from any other parameter). This has resulted in two scenarios, a lower reference scenario and an upper scenario. The next uncertainty lies in the logistics, globally speaking, of bringing from Russia for delivery to the US Enrichment Corporation in the USA the commercial grade LEU which will also permit the deconversion of big quantities of UF6. You can imagine how that process can still place question marks on this source of supply, triggered by technical or political parameters. The recent agreement in principle between Cogema, Cameco and Nukem Inc and Russia for the purchase of a large part of the Russian DEU has led to some of the major uncertainties being alleviated or settled: The bulk of the material will be disposed of in the market through well-known reliable companies, which are already active in the uranium markets. The feed will be marketed according to the demands of the market, which is the best way for the long term health of the market, and in full compliance with the legal restrictions on its entry into certain markets. Regarding conversion, as the topic of this paper, we have to consider the DEU covered by this new agreement as equivalent to an increase of capacity. In Figure 7 we have included this DEU as additional supply. In summary regarding the issue of DEU, Comurhex feels that a real possibility exists for a smooth running deal. An observer of the conversion market might discern that the mysterious supply-demand gap could easily be filled, or at least substantially filled, by the DEU. On the other hand, an observer could also conclude that such supply is not necessarily as secure as conventional sources of supply. In the conversion market, Comurhex knows for certain that it will continue to deliver conversion services at a competitive price, without interruption and with the right specifications, to any facility in the world. Comurhex will safely store concentrates and manage book transfers without a glitch, and will be financially sound in the unlikely event that something goes wrong. Comurhex will remain eager to please its customers. As a member of the Comurhex team, I know this to be true. Can the same certainties be voiced for DEU supply? Since I belong to the Comurhex team, I would like to give you a few details about the one converter I know the most about. What is New at Comurhex? Comurhex was incorporated in 1971, as a subsidiary of the Commissariat à l'Energie Atomique and Pechiney. The Malvesi conversion plant started operating in the late 1950s. It was initially dedicated to the production of uranium metal for the French GCR programme; production between 1959 and 1992 was 25 000 tU. Electricite de France developed its PWR programme in the early 1970s, at the same time as several others countries. The Pierrelatte conversion plant was used to fluorinate UF4 produced at Malvesi to supply UF6 for commercial enrichment. Comurhex's logbooks record the long progression of production from these plants. Comurhex has long term relationships in the international market. In mid 1996 we celebrated the 200 000th tonne of conversion delivered from our Pierrelatte plant, in operation since 1971 (Figure 8). For our Japanese customers, in addition to shipments to Japan Nuclear Fuel Ltd made on behalf of each utility, we started in 1996 and repeated in 1997 a joint shipment of 50 cylinders of UF6 on a chartered vessel. We are proud to have been selected by our Japanese customers for this "premiere". UF6 production and sales at Comurhex are fully covered by the ISO 9002 certification which we obtained in 1996, and which has already been renewed once. Comurhex has been a pioneer in that field among the converters. The present situation at Comurhex is simple. The Malvesi plant is dedicated to: acceptance and storage of uranium concentrates; the first stage of the conversion: transformation into UF4; various chemical recycling activities. The current storage capacity is 40 000 tU of concentrates. Mining concentrates remain the property of our customers, and come from all the main uranium producing countries. The Pierrelatte plant is dedicated to: transformation of UF4 into UF6, which is delivered to enrichment plants. conversion of RepU - as the only company worldwide so far which converts RepU to UF6, Comurhex now has 20 years of operational experience; several activities involving diversification, resulting from Comurhex's expertise in fluorine production, in industries as different as automobiles, microelectronics, chemicals, etc. The conversion process for reprocessed uranium is much the same as for natural uranium, with the uranyl nitrate converted to UF4 in facilities capable of handling 350 tU/y enriched as high as 2.5%. This capacity can be increased if necessary. The UF4 is then converted to UF6 in a dedicated flame reactor. The policy of diversification gives Comurhex increased financial strength, a factor which is an important consideration for customers in the nuclear cycle. Utilities need a financially strong and reliable supplier to guarantee the security of their procurement. Conclusion Comurhex trusts the caution and wisdom of its customers, who well know how to secure their procurement with the necessary anticipation. We know that they will not remain complacent or be overly confident in potentially risky solutions. The analysis presented in this paper is not exhaustive, it is a simplified assessment which aims merely to spotlight some aspects of the conversion market. Its scope does not include future technical developments, either evolutionary or revolutionary, such as laser techniques or other equally interesting areas, which could be the topic for another session. It will be interesting to see how this analysis can be updated in the future, since it was prepared at a time when a new agreement on the sale of the Russian DEU had just been signed, giving a potentially more positive outlook amid the many uncertainties.