Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Uranium Prices Will Rise

Commodities / Uranium Jul 16, 2010 - 07:24 AM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleNUCLEAR RENAISSANCE, URANIUM SHORTAGE - After a long lost decade, stretching from shortly after the Chernobyl catastrophe of 1986, to around 2003, the nuclear renaissance is in full flood: the pro-nuclear World Nuclear Association (formerly the Uranium Institute) reports that as of July 2010 at least 55 new reactors are under construction in 13 countries. Power capacity added through 2010-2020 is forecast at a minimum of about 75 GW, with other estimates extending far beyond 100 GW.

This capacity hike will increase the world's nuclear capacity, from its current "fleet" of 439 civil reactors producing about 330 GW, to around 410 - 500 GW. Due to expected fast growth of world total electricity consumption, nuclear power's share of total electricity is however unlikely to grow beyond its current approximate 15% (itself down from its share in the 1990s, of up to 18.5%), although some country plans and proposals for nuclear expansion could change this. One example is claims by some Indian nuclear energy proponents, including Indian NPCIL analysts, that India alone could develop about 400 GW of nuclear capacity by around 2040.

The pro-nuclear UxC consulting firm provides characteristically bullish forecasts for the nuclear renaissance, of world reactor numbers increasing to 568 in 42 countries with a total power capacity of 517 GW and uranium requirements rising to 120 000 tons a year, by 2020

Uranium production, stocks, supply and prices are very surely back in the minds of political and economic deciders, if not the press and media, because of simple supply/demand figures.

Taking 2009, and forecast demand for full year 2010, uranium demand for civil reactors totalled about 65 000 tons, and a forecast 68 000 tons. World mine production of uranium in 2009 was only 50 500 t (a large rise on the 43 800 t for 2008), but expected mine output in 2010 will probably not exceed 55 000 t. Actual results could be less, perhaps below 50 000  t, depending on many factors. These include the continuation of major mine expansion programmes, accident-free mine upgrading, avoidance of industrial and technology risks, economic and financial issues including the uranium price, and mine ownership struggles, and in some cases geopolitical and national security issues.

The large growth of world mine output in 2008-2009 has a single cause: Kazakhstan's determination to become N°1 world exporter. Future growth of Kazakh mine capacity and output will however be surely much less than in 2007-2009. Mine operators in world producer countries with the largest export surplus, especially Australia, Kazakhstan, Canada, Niger, Namibia are all engaged in expansion, upgrading, and development programs, as well as exploration and development. Despite this the "Big 5" suppliers , four of which do not presently utilise nuclear energy, are unlikely to achieve future rapid expansion of mine output and export supply.

The world civil reactor "fleet", excluding the world's estimated 250 research and military reactors, therefore has a uranium supply shortfall of well beyond 13 000 t in 2010, in that which concerns "fresh supplies", from mines.  This shortfall is about 8 times the USA's total mine output of 2009, or more than 15 times China's total mine output in 2009, and can be compared with Kazakhstan's status of N°1 world uranium miner: its record total production in 2009 was about 13 800 t. Uranium importers face a tight supply situation, with a possible intensification of long-term undersupply, obviously able to drive prices to high or extreme levels.

Apart from fresh-mined uranium, usually produced as uranium nitrate, or better-known yellow colored oxide paste or concentrate ("yellow cake"), uranium supplies are simple to enumerate: stocks of uranium held by miners, power companies, reactor manufacturers, national agencies and a few other sources  recycled uranium from used fuel rods, mixed with plutonium and other transuranic elements in MOX (Mixed OXide fuel), only commercially produced in France and to a small extent UK; and recycled, diluted high-activity uranium from surplus nuclear weapons of the USA and Russia, that is "Megatons to Megawatts". 

Potential large scale sources of non-mine supply, of uranium or other radioactive materials able to power different types of reactors, include thorium for Canadian CANDU reactors and thorium and plutonium for India's fast breeder reactor programme, upgrading thorium to uranium-equivalent reactor fuel. These non-mine methods of producing uranium or uranium-equivalent fuels are joined by numerous proposals for novel or innovative uranium extraction processes for low grade (low uranium concentration) sources, including biochemical methods. However, technical and industrial feasibility, cost and security issues tend to limit all of these alternatives to uranium, at present. Fast breeder reactors (FBR) have a long and undistinguished history, stretching back more than 50 years, marked by extreme cost and in some cases extreme risks of catastrophic accident: outside India, current activity and interest in the FBR domain is low. Most interest relates to using future FBRs, if they are built, for disposal of nuclear wastes, not fuel production (see eg: ).

At present, the three above cited non-mine sources of uranium are sufficient for reactor needs, but each faces large pressures limiting future supply growth or availability, reinforcing the outlook of supply shortage. Actual shortage is however unlikely to be quickly signalled by sharp price rises of downstream uranium fuel due to the number of steps or stages, and value adding, in the "fuel supply chain". This starts with upstream fresh mined uranium, moving downstream through converted or processed 'separative work units' (SWU) and 'fabricated fuel units' that is processed or enriched uranium, or MOX fuel, packed into fuel rods, calculated on a rising cost per unit weight basis. This pricing method for uranium-based fuels clearly shows the high upstream costs of SWU and the high cost of fuel fabrication (see: )

Uranium shortage will however be signalled, with some delay, by price moves in the mostly company-to-company sales process for uranium. This small, unquoted, very opaque and essentially B2B uranium spot sales system, for which prices are reported by UxC and a few other sources with a delay often exceeding 1 month from transactions covered, will certainly react to uranium shortage. Supply shortage is highly probable in 2010, and therefore price spikes are very likely, this outlook being made more likely due to the large fall in prices through 2008 and 2009.

The probable coming price spike may perhaps reproduce the price spike of Q2 2007, during which 'spot' prices attained more than US $ 130 per pound, to be compared with the most recent and perhaps 'historic' price low, of around US $ 8 per pound in year 2000.

Very likely, prices will soon fall after the next price peak, as in 2007-2008, but unless new mine supply is developed the next price trough will be a short-term. This sets a certain "opportunity window" for upstream or downstream innovation, probably no larger than the next 5 - 7 years during which large scale and unlikely reductions of specific uranium needs (usually measured as pounds of fuel per reactor Megawatt-day), or unlikely large scale increase in uranium mine output, or major and unlikely reactor technology change reducing uranium's role in nuclear power must be achieved.  As the WNA and reactor builders such as Toshiba-Westinghouse, KEPCO, Areva report, one ongoing major trend for uranium conservation and fuel efficiency raising, is the trend towards ever-larger unit size reactors or reactor complexes, now often 1.4 GW to 1.6 GW each reactor, and sometimes over 5 GW per complex, compared with previous technology standards, of 0.9 GW per reactor and single reactor complexes (see eg: ).

Despite efficiency raising, and mainly due to fast growth of nuclear capacity without a corresponding increase of world mined or "fresh" uranium supply, the absence of practical solutions being found will logically lead to serious and large-scale shortage of uranium. This will radically raise fuel costs despite uranium prices being only the first link in prices through the uranium fuel "value added chain". In turn this may perhaps heavily reduce the credibility and profitability of nuclear energy, which already suffers the two main handicaps of very high capital cost (usually above US $ 4000 per kW), and both short-term and long-term security risks.

The average crustal abundance of any wanted mineral or metal should always be considered with its clarke, or ratio of minimum economically and technically feasible orebody richness of the wanted metal or mineral, relative to its crustal abundance. For uranium, quite wide varying figures are given for its average crustal abundance, from around 3 ppm (parts per million) to above 4 ppm, which is about 1000 times gold's crustal abundance (about 4 parts per billion). Gold, to be sure, is not a fuel mineral and is very widely traded, but its present market price is around US $ 1200 a Troy ounce, or US $ 17 570 per pound, while uranium in July 2010 changes hands at about US $ 41 per pound.

Due to its market value, the clarke for gold is much lower than the cut-off concentration ratios needed for economically feasible uranium mining, especially where other high, or relatively high value minerals such as silver, copper, lead, zinc, cobalt, manganese are present in the orebody in extractable quantities. The clarke ratio economically feasible uranium mining, today, is generally around 70 - 250 tiles the crustal abundance of uranium. Current minima for feasible uranium extraction are around 300 ppm, or around 70 times the crustal abundance, for open pit and 'heap leach' extraction methods, and usually above 1000 ppm (0.1 %), or 250 times the crustal abundance, for economically feasible underground mining extraction.

This is the present context, set by a relatively long period (around 20 years through 1985-2005) during which uranium supply and stocks were abundant, and annual reactor orders and building fell to very low levels. Before that period, taking the period during which the 'race for the bomb' was at fever pitch, from the late 1940s to the 1970s, during the peak Cold War period, competition for uranium supplies by the present 'declared nuclear powers', the Big 5 UN Security Council permanent members, drove uranium prices expressed in dollar of 2010 buying power well above the 2007 price peak. In turn, this made uranium extraction feasible from orebodies with uranium contents as low as 100 ppm, or lower (see eg:'uranium , or in the US 'uranium rush'  At the time, gold and uranium were in several cases treated as resources of similar combined economic and strategic value, for example in South Africa (see eg: )

Uranium at low to very low concentrations is naturally found in many types of rocks and minerals including coal, fly ash, shale, sandstones, granite, and to be sure, in even lower concentration (about 1000 time less), in seawater. Naturally occurring uranium concentrations typically occur after geochemical changes including action by acid and basic chemical agents, such as pyrites, hydrogen sulfide acting to slow or stop its solubilization. This naturally occurring uranium is typical insoluble, and thus stable, but is often made easily soluble by oxidation and complexing with phosphates, carbonates or sulfates. In very general terms, concentrations of uranium in mine rocks such as copper mine rocks can extend up to about 40 ppm. To be sure, extraction of uranium from such low concentrations is energy and chemicals intensive, and can only be costly.

To be sure, world mined gold production exhibits 'classic' geological depletion expressed as rising extraction costs and energy intensity, and a large recourse to reworking mining wastes and tailings from orebodies having submarginal clarkes at prevailing previous market prices for gold. Despite this, driven by fast rising gold prices, little or no expansion of total annual gold supply is occurring: current mine output is around 2 450 t per year. The outlook for uranium mining is similar, with a potential recourse to orebodies of low concentration, as the market price rises, reducing the clarke ratio for feasible prospects.

Uranium demand for the world's present reactor 'fleet', as already noted will be about 68 000 t in 2010, and by 2020 the annual uranium requirement could attain 120 000 t.

The present context, of current 2010 uranium requirements being about 68 000 t, with the annual requirement perhaps rising as high as 120 000 t by 2020, has no previous precedent except that of the 'early nuclear age' and Cold War period, referred to above, during which the nuclear industry shifted uncertainly from military-only to military-and-civil. During that period uranium need made the question of price relatively unimportant. Estimates for uranium prices (comparable U235/U238 grade to "yellow cake") during the 1950s, in dollars of 2010 buying power, easily extend beyond US $ 250 a pound. W can conclude that price spikes to these levels are very unlikely in the short-term 2010-2011 period, but a tripling of the 'spot' price from the current July 2010 level is far from impossible.

By Andrew McKillop

Project Director, GSO Consulting Associates

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

© 2010 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in