Antinuclear

The uranium industry in deep trouble

The industry hopes that reactor restarts in Japan will improve the situation − but restarts will be slow and in many cases strongly contested. The industry hopes that new build in China will improve the situation − but pre-Fukushima nuclear growth projections have been sharply reduced and China now plans to approve a “small number” of new reactors projects each year.

Uranium price slumps, Paladin Energy in trouble  Jim Green WISE/NIRS Nuclear Monitor #768, 27 Sept 2013  The spot uranium price fell to US$34.50 / lb U3O8 in late July, a price not seen since December 2005 during the upswing of a spectacular price bubble which peaked in June 2007 at US$138 / lb. The 12% price slump in July was the biggest monthly loss since March 2011. Since September 2, the spot price has been still lower, at US$34.00. Those prices are just over half the spot price of US$66.50 / lb on 11 March 2011, the first day of the triple-disaster in north-east Japan.[1]

The long-term contract price has been reasonably stable in recent months at US$57 / lb. At that price, the value of annual global uranium requirements for power reactors is around US$10 billion.

FNArena wrote on September 17: “The issue of low uranium prices discouraging new supply is not just one of the spot price itself but one of the marginal cost of new supply. Producers suggested to Ux that the average marginal cost of production of operating mines is around where the spot price is now, but the marginal cost of developing a new mine is more like US$65-70/lb. From the nuclear energy prospective, respondents rated the most significant demand-side influences as, in descending order of influence, Japanese reactor restarts, Chinese reactor build, the premature shutdown of older US reactors and the emergence of newcomer countries to nuclear energy (about equal), and the upcoming French nuclear licence renewals.”[19]

Raymond James analyst David Sadowski expects an average spot price of $40 per pound this year, $52 in 2014, and $70 in both 2015 and 2016.[2] Michael Angwin from the Australian Uranium Association expects low prices until about 2017/18, and a nasdaq.com article states that “the road to recovery for this battered commodity will be a long haul”.[3,4] Rob Atkinson, outgoing CEO of Energy Resources of Australia, says the uranium spot price is woeful, making it extremely difficult to make the case for developing a new mine, and the market will remain difficult for at least another two years.[21]

The industry hopes that reactor restarts in Japan will improve the situation − but restarts will be slow and in many cases strongly contested. The industry hopes that new build in China will improve the situation − but pre-Fukushima nuclear growth projections have been sharply reduced and China now plans to approve a “small number” of new reactors projects each year.[5]

The industry hopes that the end of the US-Russian ‘Megatons to Megawatts’ program − downblending highly enriched uranium from weapons programs for use in power reactors − will improve the situation. But mine production has met an increasing proportion of demand in recent years − 78% in 2009 and 2010, 85% in 2011 and 86% in 2012 (the shortfall was around 10,000 tonnes of uranium in 2011 and 2012).[6] This suggests that the end of the Megatons to Megawatts program will have a moderate impact. There is scope for weapons material to continue to supply the civil market regardless of future bilateral US-Russian agreements.[7] Ux Consulting noted last year that reduction in demand stemming from the Fukushima accident “essentially negates much of the reduction in supply resulting from the end of the US-Russia HEU deal”.[8] Utilities have built up uranium stockpiles in recent years as a result of low uranium prices (the World Nuclear Association estimated commercial inventories totalling 145,000 tonnes of uranium in 2010 − enough to supply global demand for two years).[9]

Jeb Handwerger, described by Uranium Investing News as a “uranium bull and stock guru”, says that “Smart money recognizes the bottom.”[10] But smart money is heading for the door. At the Paydirt Uranium Conference in February 2012 in Australia, it was clear many companies were looking elsewhere, prompting an industry veteran to quip that copper and gold had never before enjoyed so much airtime at a uranium conference.[11] A year later, attendance was so poor that the conference was reduced from two days to one day and shifted from the Hilton Hotel to a less opulent venue.

Uranium gloom and doom is also being felt in the enrichment sector. Urenco posted a 45% drop in revenue for the first half of 2013 and a 31% fall in earnings (compared to the first half of 2012). Revenue fell to 384 million euros and earnings dropped to 319 million euros. Urenco said it expects a “substantial rebalance” during the second half of the year due to continued capacity expansion in its US facility and the construction of a new unit in the UK. The UK government owns one third of Urenco, as does the Dutch government, with the final third held by German utilities E.On and RWE. All the owners have been looking to sell their stakes but have so far failed to secure a deal.[20]…..

September 28, 2013 - Posted by Christina Macpherson | AUSTRALIA - NATIONAL, business, uranium