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Why Uranium Prices Are Rising Again

Commodities / Uranium Nov 17, 2011 - 01:00 PM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleWHAT GOES DOWN, GOES UP
We must start with the ultra-basic fact there is no such thing as an "open market" for uranium. Prices are reported by a select few nuclear-related organizations (like UXC) on the basis of what nuclear operator companies, power plant builders, uranium miners, and certain other players in the nuclear fuel value added chain decide to disclose as the prices paid or received when uranium and its fuel derivatives are handed over from one player to another, weeks after the event.

What we know is that following the March 2011 Fukushima disaster prices crashed from a very high level of around $72.50 per pound (about $160 per kilogram) in February, and since that time have agonized at levels as low as $48/pound. They are rising again, now.

Nothing - in theory - says uranium prices should recover and fast, but they probably will.

The Fukushima disaster, in part because it was so massive but also because it happened in a western, liberal-democratic country, was impossible to talk down and out, and sweep under the rug. The carefully nurtured, totally false image of nuclear power - clean, safe and cheap - took what is very likely a mortal hit. The Fukushima disaster was arguably the first-, or second-worst calamity in the history of nuclear power. Following the 9.0 magnitude Tohoku-Pacific ocean earthquake and its ensuing tsunami, Tokyo Electric Power Company’s (TEPCO) Fukushima Daiichi plant suffered a complete station collapse, and partial core meltdowns, among other major malfunctions. TEPCO is now bankrupt and its debts are now public debts - and are vast. Four of the six reactors at the site are now irreparably damaged, and the whole 6-reactor complex is expected to be completely abandoned, after decommissioning and Safestor (entombment), and possible soil scraping over dozens of square kilometres, at such extreme cost it will almost certainly never be accomplished.

Things look very bad for uranium "market" players but above all, selling nuclear power needs high oil prices, to work. Japan is quite a long way from California and Cologne, New York and Newcastle, enabling heroic blustering and posturing by diehard defenders of the "clean, safe and cheap" nuclear mantra to try one more time for those high-paid talking slots, where as recently as late 2010 they could gargle Global Warming and High Oil Price doom slogans - and get paid. Nobody died of boredom and many persons were stupid enough to pay to listen, in those halcyon days for selling the Friendly Atom, but high priced oil is the real propellant for launching the nuclear sales rocket. They know it, we know it, so pushing up oil prices is the last-best chance for nuclear power, and related vanity tech pipedreams and daydreams like electric cars, offshore windfarms. solar power plants, biogas plants, and so on.

The problem is however simple: oil at even $90 a barrel is now so cheap that nobody panics. In addition, the Fukushima disaster not only had indelible effects on Japan, but also on the nuclear power industry worldwide, and more importantly for it sequels, on global energy markets. While some of the ramifications are yet to be fully grasped, it is critical to begin the process of analyzing the likely impacts. These are almost all bad for nuclear power, and range right through the nuclear fuel value-add chain, from uranium mines to the dumps where not only low level, but high level cancerous radioactive wastes are carefully forgotten and left to rot. Nuclear power = Cancer.

It is relatively easy to put an oil price level for the barrel price that lets the nuclear djinn out of the bottle again, to spread its evil wings worldwide: this price level using WTI grade oil traded on the US Nymex would need to exceed $120 - $130 per barrel. After that oil price level is attained, political deciders in the big oil oil consuming and importing countries will quickly panic and "rally back" to the so-called nuclear solution. This of course is despite nuclear power saving almost no oil at all, in any developed country simply because oil-fired electricity generation is an olde tyme curiosity from at least 25 years back in time. But that is far too sophisticated for politicians or their middle class voting public to understand.

Saving nuclear power - along with big ticket, high priced green energy vanity tech - above all needs much higher oil prices. For the nuclear lobby the good news is higher oil prices are coming, fast.

Uranium prices are likely to rise in lockstep with oil prices, but likely not as high as the February price peak ($160 per kilogram). The reasons for this feature the deadly, and deadly expensive hidden defects of nuclear power. In this, the spent fuel cycle stands out, clearer and clearer, and the main driver for this is high uranium prices (which in year 2000 were as low as $10 per kilogram). Saving uranium is at least as obsessionally important for "saving nuclear power" as saving oil is critical for saving the late great consumer society.

For an industry standard 900 MW reactor needing well over 100 tons a year of uranium, this cost item can be waved aside with a regal flick of the hand by Great Minds, by well paid Nuclear Boomers such as James Lovelock and James Hansen - but not by real world nuclear power plant operators, who have to pay for both the Boomer Boys, whose gargling doesnt come cheap, and for the fuel their real world reactors burn.

Recycling spent fuel, in its highest tech and most noxious form, as MOX (metal oxide fuel), is a delicate operation only attempted by the most foolhardy and irresponsible - that is nucleocrats in France, Japan, USA, Russia and UK. To date and effectively, MOX has been abandoned by Japan (following Fukushima), the UK (simply because of its costs), Russia (because it has other and cheaper fuel sources), and today MOX has only lip service support from the US.

The failing, last ditch real world support for MOX as a saving grace for nuclear power only comes from the Nucleocracy of  France, and right now it is under solid political attack in France.

Simply due to its fantastic danger - MOX being a mix and mingle of plutonium, enriched or "bomb grade" uranium, and regular uranium along with other especially dangerous additives - the likelihood of new regulatory requirements on spent fuel management is very high, which immediately creates technical uncertainty on the engineering challenges and possible solutions for waste handling, such as spent fuel pools and dry cask storage systems. The EPR or European pressurizeddd reactor, a financial disaster for its only builder - Areva of France - was developed from the German Siemens 'Konvoi' reactor model, featuring high tech design responses to the future need of using MOX - and saving on uranium - because its price can only rise. This is effectively the only reactor that has ever been designed to use MOX, not used in "low doses" on conventional reactors, as France has dangerously pushed ahead with for more than 15 years - polluting a large slice of its ageing reactors with a deadly mix of nuclides.

The desperate rearguard action of mixing high level radioactive wastes with "fresh" uranium and calling it MOX is a losing bet. It is also near exclusively a French game, with very near-term and big cost implications which could help raise electricity prices by 50% in France in 5 years. The Parti Socialiste-Ecology party "coalition" or loose anti-Sarkozy alliance has already set a range of nuclear cutback goals, stretching from 15 to 24 reactors closed by 2025, and even more than that among some anti-nuclear hardliners, on a total reactor "fleet" of 58 reactors. What is almost always missing from the posturing and preening in the media is simple: the 15 reactor shutdown goal for 2025 is simply and only the number of reactors that will be outside their operating lifetime - despite "friendly life extensions" from the state - and must be retired. Only if they are shutdown earlier, say 2015-2020, is this a real cutback.

Since at least the start of the 1990s French nucleocrats have increasingly used MOX in regular reactor not originally designed for this fuel, unlike the vastly expensive EPR. To date, and depending on the truthfulness of data released by Areva and EDF, about 20 of France's 58 reactor use MOX. They are therefore even more contaminated with radiation than normal reactors. Their decommissioning will therefore be even more expensive than uncontaminated reactors.

How much does it cost to fully and safely retire a nuclear reactor ? We will find out in a large number of countries and soon. These include Germany, Switzerland, Belgium - and Japan. Other countries, especially the UK and USA, have taken a look at that future and pulled back in fear. The new trick idea is to "close and retire" nuclear reactors by simply cutting them back to zero net energy, as much power in as power out, and leave them to quietly rot on the horizon for the next 25 years. The UK has semi-official plans to do exactly that, to avoid the costs of real reactor shutdown, removal of all radioactive material, site decontamination and site recovery.

When these costs start to add up and weigh, world reactor fleets will enter a long-term profile of decline from which they will not escape: this is the wipe out curve for the delirious and dangerous Nuclear Dream. When we have the next Fukushima-type disaster, the "gentle death curve" will crack wide open and the nuclear dirt will fall into a huge black hole. Either way, slow or fast, this will carry away the uranium industry when the nuclear industry falls to the ground - leaving vast tracts of no-go uninhabitable land for surviving humanity to live with, as best they can. But right now, uranium prices will be rising. Go for it.

By Andrew McKillop


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

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2011 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.


01 Dec 11, 10:08
re: How much does it cost to fully and safely retire a nuclear reactor ?

Only pandering politicians and left leaning tree huggers talk seriously about retiring nuclear reactors. Once they see it's impractical to do so without any viable replacement for a large amount of clean cost efficient energy, they quietly fade away and the nuclear plants keep on going, long after politicians have come and gone. Does anyone seriously believe Germany's politicans will be around to retire their nuclear reactors, voters are as gullible and short sighted as ever?

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