The United States and Russian governments signed an agreement in 1993 that provided for the conversion of high enriched uranium (HEU) from dismantled Russian nuclear weapons into fuel for commercial nuclear reactors. The United States followed by announcing plans to dispose of HEU in a similar manner, along with other uranium inventories no longer required for national security purposes.
The much anticipated introduction of uranium from these inventories into the marketplace was delayed while legal procedures were being developed for selling the uranium. With resolution of many of the outstanding issues during 1996 and 1997, US and Russian government surplus inventories are poised to play a key role in the world uranium market. The extent to which these inventories can provide a steady and secure source of supply is of great importance to the nuclear industry.
The Energy Information Administration (EIA), an independent organisation within the US Department of Energy (DOE), develops projections of uranium prices and supply through to 2010. The projections are made available as part of EIA's responsibility for providing energy information and analysis. EIA does not propose or advocate policy or legislation.
Because
uranium market projections are subject to considerable uncertainty,
three alternative cases were developed by EIA to analyse the
effects of selling US and Russian government surplus inventories
on the uranium market. The analysis presented in this paper focuses
on the following government inventories declared as surplus:
- Russian HEU;
- US HEU;
- US natural uranium and low enriched uranium (LEU).
While the US and Russian governments maintain varying degrees of control over the civilian nuclear fuel cycle in their countries, this paper considers only those inventories formerly held for national security purposes as government surplus. In addition to portions of US and Russian HEU to be released under current plans, it is likely that other inventories of HEU will made available by the US and Russian governments beyond the forecast period. Because the quantities and the timing of additional releases are not known at present, this analysis does not extend beyond 2010.
The US government has also announced plans to dispose of surplus plutonium, including recycling it into fuel for nuclear power plants. Russia could follow a similar course. Because the plans are undergoing regulatory review and no firm schedules have been announced, US and Russian government surplus plutonium is not considered in this paper. However, it should be noted that the market effect of the maximum releasable amount of surplus plutonium would be small.
The projections of uranium price and supply reported in this paper are generated from EIA's Uranium Market Model (UMM). The UMM is a microeconomic model in which uranium from available sources of supply is used to meet the demand for uranium from utilities' nuclear power plants. The projections reflect known technology, uranium reserves, costs, procurement practices, and current laws and regulations. Supply and demand are considered for 16 regions worldwide, including Russia and the United States.
Uranium supply is represented by an annual short-run supply curve consisting of increments of potential production and the supply of excess inventories. Increments of supply are assumed to be available to the market at different prices. Suppliers that are able to sell uranium most cheaply generally occupy the lower portions of the supply curve. Exceptions are those high cost suppliers that hold contract commitments.
Demand is assumed to equal unfilled requirements of utilities. In determining unfilled requirements, the UMM takes into account reactor requirements, utility inventories, and contract commitments to purchase uranium. Annual projections of reactor requirements for the world come from EIA's International Nuclear Model. Contract commitments and inventory holdings are model inputs.
Recent Developments
Since mid 1996, comprehensive plans have been announced regarding the commercialisation of US and Russian government surplus inventories beginning in 1997 (see Appendix 1). Based on these plans, the natural uranium equivalent of 158 000 tU (410 million pounds U3O8) would be supplied to the uranium market through 2010. This quantity is equivalent to 2.5 times world uranium requirements projected for 1998 (Ref 1).
The blending down of Russian HEU to LEU is expected to account for 129 000 tU (335 million pounds U3O8), the largest share of uranium to be made available from government surplus inventories through 2010. This assumes that the annual quantity of Russian HEU to be blended down is maintained at 30 t after the end of the current five-year implementation contract described below.
Russian
HEU
In November 1996 the US Enrichment Corporation (USEC) and Techsnabexport
(Tenex), the executive agents for the US and Russian governments
respectively, amended the US-Russia HEU agreement to establish
the price and quantities for the period 1997 through 2001. This
agreement was an important breakthrough for ensuring a dependable
supply of uranium from the Russian HEU. Previously the two parties
signed one-year contracts. Also, the amended agreement provided
for an additional 22 t of HEU to be blended down during
the period 1997-98.
Unlike the enrichment component, the natural uranium feed component of the LEU derived from Russian HEU has not been sold to end users prior to 1997. Before signing the amended agreement, USEC and Tenex settled their differences over payment for the Russian HEU feed.
USEC will pay only for the enrichment component of the LEU. As directed by the USEC Privatization Act, passed by the US Congress, USEC will return to the Russian executive agent a quantity of uranium equivalent to the uranium feed component of the LEU delivered by Russia in 1997 and later years. USEC will obtain this uranium by substituting Russian LEU for natural uranium delivered to it by utilities contracting for enrichment services. Russia will receive payment for this feed by selling it to a third party which will market the uranium. As of mid 1997, the Russian executive agent had not concluded a contract to sell this uranium.
Progress
was also made regarding the placement in the market of the uranium
feed contained in the LEU derived from 18 t of Russian HEU that
was purchased by USEC during 1995 and 1996. Pursuant to the USEC
Privatization Act, USEC transferred 5500 tU equivalent (14.2 million
pounds U3O8) of this material to the DOE in December 1996. DOE
is authorised to sell this material:
- to the Russian executive agent for use in matched sales (with equivalent amounts of newly produced US uranium) to US end users pursuant to the Suspension Agreement between the United States and Russia;
- at any time in the United States for overfeeding enrichment plants;
- at any time for end use outside the United States;
- for consumption by US end users after 31 December 2001, at no more than 1200 tU (3 million pounds U3O8) per year.
In December 1996, DOE and Global Nuclear Services and Supply (GNSS), representing the Russian executive agent, signed a contract whereby GNSS would purchase from DOE up to 3000 tU (7.8 million pounds U3O8) of this material from DOE for use in matched sales to US end users (Ref 2).
US
HEU
In September 1996 DOE issued its plans for disposing of HEU,
including the commercialisation of 90 t of HEU over the
next 15 years (Ref 3). In addition, the
title for 13.2 t of HEU had already been transferred by
DOE without cost to USEC to fund liabilities at the DOE-owned
enrichment plants, pursuant to the Energy Policy Act of 1992.
Because it is already in the form of uranium hexafluoride (UF6),
the 13.2 t of HEU can be blended down directly in the enrichment
production stream. USEC anticipates that the blending of the
high enriched UF6 will take place over three years from 1997
to 2000 (Ref 4).
The USEC Privatization Act directed DOE to transfer to USEC without cost a further 50 t of HEU, along with up to 7000 t of natural uranium. Although held in various metal and oxide forms, USEC plans to complete the blending down of this HEU by 2002. USEC is not permitted to sell the equivalent uranium from these transfers before 1 January 1998. Sales in any year after 1997 are limited to less than 10% of the equivalent quantity of uranium, not to exceed 1500 tU (4 million pounds U3O8) per year.
The remaining 40 t of HEU contains quantities of U-236 above the level specified by the American Society for Testing and Materials as acceptable for use in producing commercial nuclear fuel. Because of the need for additional purification, DOE anticipates that this "off-spec" HEU will be available for commercial use beginning in 2001. Meanwhile, DOE and the Tennessee Valley Authority (TVA) have signed a memorandum of understanding whereby TVA will utilise off-spec material in fuel for its nuclear power plants. TVA will pay for the uranium feed and enrichment contained in the LEU blended down from HEU, while DOE will pay for the blending down of the HEU.
DOE
Sales of Natural Uranium and LEU
In July 1996 DOE announced plans to sell 7800 tU equivalent
(20.3 million pounds U3O8) of natural uranium, and 460 tU
equivalent (1.2 million pounds U3O8) contained in 45 t
of LEU over seven years. This inventory was previously held for
US national security purposes. By law the Secretary of Energy
was required to determine whether such sales would adversely
impact the US uranium mining, conversion or enrichment industry.
In March 1997 the DOE Secretary determined that the sale of 1200 tU (3.2 million pounds U3O8), scheduled for the fiscal year ending 30 September 1997, could take place without causing adverse impact to US industry (Ref 5). Meanwhile, a continuing decline in the uranium spot market price has caused DOE to re-evaluate its sales programme. On 31 July 1997, DOE issued a notice of plans to sell 400 tU (1 million pounds U3O8) instead of the initial quantity considered (Ref 6). The delivery of this uranium to customers is to be made between September 1997 and October 1999.
Market Issues
Because of non-proliferation policy and fiscal considerations, it is likely that both the US and Russian governments will support the commercialisation of government surplus inventories as scheduled. However, the market penetration of the uranium supplied from these inventories is not a mutually exclusive process. It is dependent on the interaction of many factors, including demand, national policies toward trade and security of supply, competing supplies, utility procurement practices, and supplier marketing strategies. In view of these factors, not all of the uranium made available from government surplus inventories is expected to be sold immediately over the next few years.
Demand
In
developing the UMM price and supply projections presented in
this paper, EIA used projections of reactor requirements from
the reference case generated by EIA's International Nuclear Model.
This case assumes that most reactors will operate to the end
of their licence limits. Over the UMM forecast period of 1997
through 2010, the world's annual reactor requirements are projected
to range from 61 000 tU (158 million pounds U3O8)
to 64 000 tU (167 million pounds U3O8) (Ref 1).
For the reference case, reactor requirements are anticipated
to reach their highest level during the middle of the next decade,
before declining slightly by 2010 (Table 1). Growth in East Asia
is projected to offset most of the decline in demand in the United
States and Western Europe.
In addition, the UMM considers the displacement of uranium demand arising from the use of mixed oxide (MOX) fuel in Western Europe and Japan as projected by the Uranium Institute (Table 1). MOX fuel is projected to displace 1900 tU (4.9 million pounds U3O8) in 2000, increasing to 3100 tU (8 million pounds U3O8) in 2010 (Ref 7) This analysis does not include the possible use of MOX fuel in Russia and the United States.
Projections of uranium requirements are based on assumptions about nuclear power generation and fuel management practices. One of the most important assumptions, operable capacity, is particularly subject to uncertainty. Electricity industry restructuring in the United States and other countries, and political opposition, especially in Europe, could result in early plant retirements. In East Asia, a region considered favourable for nuclear growth, growth rates could be tempered should Japan opt to install less new capacity than had been anticipated. Any of these situations would result in a decline in uranium demand.
Trade
Restrictions and Other Policies
The
sale of Russian HEU feed to US end users is restricted to the
matched sales quotas of the Suspension Agreement with Russia,
and the direct quotas authorised by the USEC Privatization Act
(Table
2)
(Ref
8).
The pre-1997 Russian HEU feed purchased by GNSS from DOE is expected
to enter the market over the next several years through matched
sales contracts.
Both US producers and utilities have already embraced matched sales of uranium from Russian mines and other commercial sources. In 1996, the equivalent of 1400 tU (3.7 million pounds U3O8) of Russian origin uranium were delivered to US utilities as part of 24 matched sales transactions made in 1996 or prior years (Ref 9). As of 31 December 1996, 14 matched sales contracts remained in effect for future deliveries of Russian origin uranium. In its uranium market projections, EIA assumes that 2700 tU (7 million pounds U3O8) will be sold as part of matched sales contracts from 1997 through 1999.
USEC is expected to make available 5500 tU (14.4 million pounds U3O8) of Russian HEU feed to the Russian executive agent in 1997. Assuming that the matched sales quota will be used for the sale of pre-1997 Russian HEU feed, all of this uranium would have to be sold outside the United States in 1997 (Table 2). The direct quota for selling Russian HEU feed to US end users does not take effect until 1998. However, it is not until 2004 when more than half of the scheduled supply of Russian HEU feed will be permitted to be sold to US end users.
The European Union (EU) and Japan are other major consumers of uranium that are likely to limit imports of Russian HEU feed. The Euratom Supply Agency (ESA) has enacted a policy designed to ensure security of supply for EU member countries through diversification (Ref 10) To achieve this goal, ESA has sought to limit imports from the Commonwealth of Independent States (CIS), including Russia, to 25% of total purchasing contracts. This policy is considered flexible in that it does not apply strict quotas set by law.
In addition, ESA has ruled that Russian HEU feed returned by USEC to the Russian executive agent for subsequent sale to EU end users would be considered a Russian import. Because CIS imports have exceeded 25% of total purchasing contracts over the last several years, ESA is planning to carefully monitor the situation. As a result, the penetration of the EU market by Russian HEU feed could be restricted in the short term. However, EIA anticipates that increasing quantities of Russian HEU feed will be sold to EU end users as existing contract commitments expire in the coming years.
In past years, utilities in Japan generally have not purchased uranium from Russia. Political differences between the two countries played an important role in barring Russian uranium imports. In recent months, however, relations between Japan and Russia have begun to improve. The two countries have exchanged top defence officials and discussed arms sales, while trade and Japanese investments in Russia have been accelerated (Ref 11). This change in the relationship of the two countries suggests that Japan could become a significant consumer of Russian origin uranium over the next few years. The possibility of Japan purchasing Russian HEU feed could be enhanced should the Russian executive agent sell the Russian HEU feed it receives from USEC to a supplier that has an established relationship with Japanese utilities.
Unfilled
Requirements and Other Issues
Assuming that schedules are met, US and Russian government surplus
inventories must compete in the world uranium market against
other sources of supply. The extent to which utilities' requirements
are covered by existing contract commitments with suppliers will
slow the introduction of new sources of uranium.
Because utilities operate on long-range planning horizons, a large share of market transactions have been made for long term supply commitments well in advance of actual deliveries. For example, US utilities reported at the beginning of 1997 that 82% of their anticipated 1998 requirements were covered by purchase contracts concluded prior to the end of 1996 (Ref 12). In future years progressively smaller shares of requirements are covered by current contract commitments (Figure 1).
Those countries whose utilities have more conservative procurement policies than US utilities would be expected to have a greater share of their future requirements covered by existing commitments. Thus, the opportunities for selling competitively priced uranium, including that from government surplus inventories, through longer term contracts will increase in later years.
Utilities have traditionally favoured procurement from diversified suppliers. By the end of the next decade the quantity of Russian HEU feed that is permitted by law to be sold to US end users will reach half of US reactor requirements (Ref 1). Because of diversification policies, sales of Russian HEU feed to US utilities might not reach the maximum level permitted by law. Nevertheless, Russian HEU feed could gain wide acceptance if it is marketed by a supplier that can offer a proven record of reliability and excess production capacity to cover unanticipated disruptions.
Strategies
for Marketing Uranium
Western suppliers are expected to acquire a large share of the
uranium derived from US and Russian government surplus inventories
for resale. Under current plans to transfer HEU and natural uranium,
USEC would receive the equivalent of 14 800 tU (38.7 million
pounds U3O8) from DOE. The ownership of this material would allow
USEC to become a major producer of enriched uranium product.
Several firms have been reported as indicating an interest in purchasing Russian HEU feed (Ref 13). The firms can be considered to fall into two groups: producers and traders. Each group could pursue different marketing strategies.
USEC and producers that might acquire Russian HEU feed could be expected to sell most if not all of their acquired uranium through long term contracts. Producers would also have the flexibility to modify mine production plans to accommodate these acquisitions. The strategies are likely to ensure more stable uranium prices that would support the costs of produced uranium.
Traders, on the other hand, could sell a much greater share of uranium on the spot market than the producer group. Since they do not own uranium mines, a marketing strategy could be directed toward gaining market share at the expense of producers and decreasing inventory holding costs. This would be accomplished in part by offering uranium at competitive prices on the spot market.
Selling in the spot market, however, has become increasingly unattractive due to the recent decline in price. The average uranium spot market price had declined from US$42.90/kgU (US$16.50/pound U3O8) in June 1996 to below US$29/kgU (US$11/pound U3O8) by June 1997 (Ref 14). More likely, a firm engaged in trading would conclude a significant amount of long term contracts to establish itself as a reliable supplier.
Excess
Commercial Inventories
Since the early 1980s excess inventories held by suppliers and
utilities have filled a gap between uranium production and demand
in Western countries. CIS imports have contributed to this supply.
For example, Euratom reports that 16 600 tU equivalent
(43.2 million pounds U3O8) was imported to the EU from the
CIS in 1996 (Ref 10). Of this, 6800 tU
(17.7 million pounds U3O8) were under purchase contracts
for EU utilities. The remaining quantity of uranium was held
in inventory for later delivery to customers both in and outside
the EU. In comparison, Kazakstan, Russia and Uzbekistan produced
4800 tU (12 million pounds U3O8) from mines during
1996 (Ref 15). From these data,
it is evident that the CIS has been exporting uranium from inventories.
In the United States, inventories held by utilities and suppliers, excluding DOE and USEC, increased from 27 900 tU equivalent (72.5 million pounds U3O8) at the end of 1995 to 31 300 tU (81.2 million pounds U3O8) at the end of 1996, a gain of 12%.(Ref 16) This increase, the first for the United States since the early 1980s, is attributed to discretionary purchases made by utilities during 1995 and 1996.
Because of the uncertainty regarding the availability of material imported from the CIS, it is difficult to assess the level of excess inventories in the future. EIA anticipates that commercial inventories will continue to be an important source of supply over the next several years. By 2000, CIS exports are expected to decrease to levels matching production. With less available CIS supply, commercial inventories could be drawn down to levels no longer considered as excess. At the same time, US and Russian government surplus inventories are expected to fill the role held by traditional commercial inventories in filling the gap between uranium demand and production.
HEU
Feed for Russian Internal Use
The availability of Russian HEU feed for Western consumption
could be reduced at the discretion of the Russian executive agent.
The agent could opt to use some of the uranium feed returned
to it by USEC to fill Russian reactor requirements or to meet
long-standing commitments by Russia to provide fuel for reactors
in neighbouring countries.
EIA anticipates that Russia will have a strong incentive to sell HEU feed to Western buyers, as an important source of foreign exchange. However, Russia may consider taking back HEU feed to meet internal requirements if its inventories of natural and enriched uranium decline below the level it considers adequate for strategic purposes. Because no official information is available on the size of Russian inventories or sources of uranium supply, it is difficult to assess Russia's potential needs.
Recent analysis concluded that inventories of natural and enriched uranium held by Russia may be in the order of 75 000 tU equivalent (195 million pounds U3O8)(Ref 17). With Russian production exported to Western countries, internal requirements are believed to be filled largely from these inventories and by enriching depleted uranium contained in enrichment tails.
Besides its own reactor requirements, Russia has long term fuel export commitments to neighbouring countries including Armenia, Bulgaria, Lithuania and Ukraine. Russia and these four importing countries are projected to require 101 000 tU (262 million pounds U3O8) to operate reactors between 1997 and 2010 (Ref 18). Although depleted uranium and uranium production from Ukraine are expected to be available, a substantial reduction of Russian inventories of natural and enriched uranium will be necessary to meet these requirements.
To allow Russia to directly take back HEU feed, the United States is required by the Atomic Energy Act of 1954 to enter into an agreement for peaceful nuclear cooperation with Russia. The US and Russian governments have not as yet entered into such an agreement. However, the USEC Privatization Act permits USEC to deliver Russian HEU feed to a North American facility designated by the Russian executive agent. Once delivered to Canada, the Russian executive agent could contract a Canadian producer to swap an equivalent amount of uranium mined in Canada for export to Russia. This would be possible because an agreement for peaceful nuclear cooperation exists between Canada and Russia.
UMM Analysis Cases
In developing projections of spot market price and supply, EIA assumes that certain quantities of uranium derived from US and Russian government surplus inventories will be sold in the uranium market to meet demand. Based on the market factors presented in the previous section, EIA anticipates that the penetration into the uranium market by US and Russian government surplus inventories will be constrained over the next few years.
In the reference case, the quantity of uranium assumed to be sold annually in the market will approximate the scheduled availability by 2005 (see Appendices 1 and 2). Sales of uranium contained in Russian HEU feed, the largest component of government surplus inventories, is assumed to reach 9200 tU (24 million pounds U3O8) in 2001 and remain at that level through 2010.
The lower HEU feed case, using the reference case as a base, was developed to analyse the potential effects on the world market of the withdrawal of Russian HEU feed at about 3000 tU (8 million pounds U3O8) per year for internal Russian use beginning in 2002 (Appendix 2). This amount is equivalent to one-third of the uranium feed contained in the LEU blended down from 30 t of HEU.
Because not all the available Russian HEU feed is projected to be sold during the period 1997-2000, the supply from stockpiles is expected to maintain the availability of Russian HEU feed at 9200 tU (24 million pounds U3O8) per year from 2002 through 2005 (Table 3). By 2007, the availability of Russian HEU feed would be reduced to 6200 tU (16 million pounds U3O8) per year.
In the upper HEU feed case, also based on the reference case, Russian HEU feed that was not sold during 1997-2000 is assumed to enter the uranium market, starting with 800 tU (2 million pounds U3O8) in 2002, increasing to 1600 tU (4 million pounds U3O8) per year in 2003 through 2010 (Appendix 2). The total amount of Russian HEU feed (not including pre-1997 feed) assumed sold to meet demand would peak at 10 800 tU (28.0 million pounds U3O8) per year in 2003 and subsequent years.
Uranium Price and Supply Trends
Because the uranium reactor requirements of China and the CIS are supplied internally, the following discussion of uranium price and supply will focus on the so-called Western World market. In this paper, uranium price refers to the spot market price for the US market, in which CIS imports are restricted. With increasingly larger quantities of Russian origin uranium to be supplied from HEU, the distinction between the restricted and unrestricted prices is expected to diminish, possibly disappearing altogether. The projections of price and supply presented in this paper represent broad trends that do not reflect short term market volatility.
Western demand for uranium over the forecast period is anticipated to be met by Western production, CIS imports, commercial inventories, MOX fuel, and US and Russian government surplus inventories. The relative importance of these sources is expected to change by early in the next decade. Excess commercial inventories, built up largely through the accumulation of CIS imports, have contributed to the uranium price falling below US$30/kgU (US$11/pound U3O8) during 1997 (Figure 2). Excess inventories and CIS imports are projected to supply the Western market with about 20 000 tU (52 million pounds U3O8) in 1997, or about 35% of projected 1997 Western requirements.
The CIS is not expected to continue exporting uranium at levels higher than its annual production. This level is assumed to be between 4000 and 5000 tU per year (10 and 13 million pounds U3O8). With fewer imports from the CIS, commercial inventories (excluding uranium supplied from government surplus inventories) in Western countries are likely to decline by early in the next decade, to levels no longer considered as excess.
The decline in CIS imports and excess commercial inventories will be offset in part by the introduction of US and Russian government inventories. Nevertheless, EIA projects the uranium price to rise as increments of higher cost production will be required to meet demand.
For the reference and lower HEU feed cases, prices are projected to rise to about US$40/kgU (US$15/pound U3O8) in 2004. Western production is projected to reach 36 700 tU (95.4 million pounds U3O8) by 2005, up from 31 600 tU (82.2 million pounds U3O8) in 2000 (Table 3). Relatively low cost production from mines in Canada and Australia is expected to contribute 26 200 tU (68 million pounds U3O8), or 72% of Western production projected for 2005. The price for the reference case is projected to remain in a relatively narrow range through 2010. The effects of slightly lower demand on supply near the end of the forecast period will be offset by a decline in uranium supplied from US government surplus inventories.
For the lower HEU feed case, Western production is projected to rise to 39 500 tU (102.6 million pounds U3O8) in 2010 (Table 3) as the supply of Russian HEU feed is reduced. The uranium price is projected to rise to between US$43 and US$45/kgU (US$16.50 to US$17/pound U3O8) between 2007 and 2010. Higher cost capacity in the United States, South Africa and other countries would be utilised at this level of price (Table 3). For example, US production is projected to increase from 3200 tU (8.4 million pounds U3O8) to 4200 tU (11 million pounds U3O8).
With a higher assumed Russian HEU feed supply, the price for the upper HEU feed case is projected to fall to between US$37 and US$39/kgU (US$14 to US$15/pound U3O8) from 2003 through 2010. In this case, this increased supply of Russian HEU feed would displace 1600 tU (4 million pounds U3O8) of Western production.
Conclusions
Non-proliferation objectives and financial considerations are expected to provide the US and Russian governments with ample incentives to meet schedules for making surplus inventories available to the commercial nuclear fuel market. Trade restrictions and certain market factors will limit sales to end users in the near term.
Over the five years to 2002, government surplus inventories are expected to become a more important supply of uranium than CIS exports and excess commercial inventories. By 2002, government surplus inventories are anticipated to supply around 25% of the Western World's reactor requirements. This share drops to just under 20% toward 2010 as most of the US government inventories currently considered for commercialisation would have been sold in the market by that time.
Supply from US and Russian government surplus inventories is not expected to close the gap between current levels of primary uranium production and longer term demand projections. In all three analytical cases developed by EIA, the uranium spot market price is projected to rise to a level of at least US$37/kgU (US$14/pound U3O8) to support increased primary production. Based on assumptions regarding the rate at which Russian HEU is sold in Western markets, the overall levels of uranium spot market price are projected to vary by about US$5/kgU (US$2/pound U3O8).
Projections of the uranium market are subject to considerable uncertainty. With regards to government surplus inventories, the quantity of Russian HEU feed that could become unavailable for use by Western consumers is not known at this time. If Russia takes back a large share of the HEU feed for internal use, prices would be expected to rise to support additional primary uranium production.
In another scenario, larger than anticipated sales of uranium from government surplus inventories over the next few years could convince Western producers to postpone developing new mines. This could result in a substantial price increases in later years. Other, as yet unspecified, quantities of US and Russian HEU could be released to the commercial market later in the forecast period resulting in a displacement of primary production.
A key demand factor is the uncertainty over unanticipated early retirements of nuclear power plants. A reduction in operable nuclear power capacity would result in a decline in demand for uranium. Assuming that government surplus inventories are still made available, less primary uranium production would be required.