Antinuclear

Australian news, and some related international items

The coronavirus pandemic and the uranium industry

The coronavirus pandemic and the uranium industry

Jim Green, 25 May 2020, Nuclear Monitor #885, www.wiseinternational.org/nuclear-monitor/885/nuclear-monitor-885-25-may-2020

The uranium industry has been harder hit by the coronavirus pandemic than other sectors of the nuclear fuel cycle. Major producers have sharply cut production.

First, a quick summary of the past 15 or so years to put the current turmoil in context. Uranium mine production increased by 50% from 2007 to 2016.1 But the expected nuclear renaissance didn’t eventuate so increased uranium production has resulted in ever-growing stockpiles. Those stockpiles alone would suffice to keep the entire global reactor fleet operating for roughly eight years.2

Surplus production and stagnant demand have put persistent downward pressure on uranium prices. AMP Capital estimated in 2018 that around half the world’s uranium mines are losing money.3 The World Nuclear Association acknowledged in September 2019 that oversupply in recent years has led to a sizable reduction in uranium production levels at existing mines and a sharp decrease in investment in the development of new and existing mines.4 In 2011, according to a uranium company executive, there were about 420 companies around the world exploring for or mining uranium; now, the number is 62, of which 27 have “limited to non-existent resources”.5

Even before the recent pandemic-related cutbacks, numerous mines had been put into care-and-maintenance or production was reduced:6

  • In Australia, the Beverley, Beverley North and Honeymoon mines were put into care-and-maintenance (and at the Ranger mine, mining has ceased and the processing of stockpiled ore will be soon be completed).
  • Cameco has put several uranium mines into care-and-maintenance in recent years: McArthur River (and the Key Lake mill) and Rabbit Lake in Canada, and the Crow Butte and Smith Ranch-Highland in-situ leach mines in the US.7 Plans to expand Crow Butte were abandoned in 2019.
  • Kazakhstan’s (mostly) state-owned uranium producer Kazatomprom cut uranium production by 20% in late 2017. Kazatomprom announced last year that the 20% curtailment of production will be extended until 2021, and its statement left plenty of wriggle-room for curtailment beyond then.8
  • In Africa, the Langer Heinrich and Kayelekera mines were put into care-and-maintenance (and Paladin has since sold the Kayelekera mine).9

As a result of those cutbacks, uranium supply last year (from mines and secondary sources) roughly matched demand, ending years of oversupply.10

Further cutbacks

In recent months, the covid-19 pandemic has led to another round of cutbacks.

Kazatomprom said in early April that its uranium production this year will be about 4,000 tons lower than last year as a result of pandemic protection measures, a drop of about 18% of Kazakhstan’s production and 8% of global production.11-13 The curtailment of production will last for three months, Kazatomprom said ‒ and clearly there are uncertainties beyond that period. Kazatomprom says that it has stockpiles to cover reduced production and will therefore meet all sales contracts.14

Cigar Lake was until recently the largest operating uranium mine in the world (6,900 tons in 2019) and Cameco’s only operating mine in Canada. But in April, Cameco closed Cigar Lake for an “indeterminate” period.15 Cameco cited precautions and restrictions put in place by the federal and provincial governments, concern among leaders in remote communities of northern Saskatchewan, and the challenges of maintaining physical distancing at fly-in/fly-out sites with a full workforce.16 Orano announced the suspension of operations at the McClean Lake Plant, which processes uranium ore from Cigar Lake, for an indefinite period.15 Cameco will also lose about 272 tons of U3O8 from curtailed production at the Inkai in-situ leach mine in Kazakhstan.15

Thus Cameco’s current global uranium production is zero or near-zero. Cameco said in November 2019 that it planned to produce only 9 million pounds of uranium oxide from its mines in 2020, with the remainder of its requirement of 30‒32 million pounds supplied from spot market purchases.17 With the recent cutbacks, Cameco will be even more heavily reliant on spot market purchases to meet its contractual requirements.

Cameco placed the Port Hope conversion facility and its Blind River refinery in Ontario in lockdown on April 8 in accordance with government directives, but announced on May 18 that the two plants would reopen.18

In Namibia, CNNC Rössing Uranium has suspended mining at the Rössing uranium mine.15 And mining has been suspended at the Husab uranium mine.19-20 Rössing and Husab accounted for about 10% of global uranium production.21

Supply and demand were roughly in balance before the pandemic, but now at least one-third of uranium production has been suspended ‒ as much as 55% according to Canadian uranium exploration company Purepoint Uranium.22

The recent shocks have increased uranium prices: the long-term price increased from US$32.50 / lb U3O8 on March 31 to $36.00 on April 30, while the spot price increased from $27.35 on March 31 to $33.25 on April 30.23

Purepoint Uranium says that the pandemic has “crippled” production and moved the market closer to the market’s long-awaited tipping point with prices sufficient to justify investment in new mines.24 That’s wishful thinking ‒ there are massive stockpiles, mines closed in the past few months that can come back online quickly, and mines put into care-and-maintenance in recent years that will mostly be cheaper to bring online than new mining ventures.

According to investment firm Cannacord Genuity, there was a small global surplus in 2019 (uranium supply exceeded demand by 5.3 million pounds, about 3% of global requirements), there will be a small deficit this year (8.7 million pound) and a negligible deficit in 2021 (0.14 million pounds).25

Of course, the estimates for this year and beyond could easily be proven wrong given the upheavals in the market. Nonetheless, claims that the uranium market is about to be revived should be treated with skepticism. One uranium company executive told the Murdoch press that the uranium supply gap is closing on critical levels, that demand is recovering from the Fukushima bear market, and that about 20 reactors will be turned on within the next 12 months.26

Wrong, wrong and wrong. The supply deficit has only emerged in the past two months and will likely be rectified as shutdowns and lockdowns are eased. Demand isn’t recovering: it has been stagnant for a quarter-century and nuclear power generation in 2020 is expected to be 2.5‒3% below the 2019 figure according to the International Energy Agency.27 In the longer term, nuclear power generation (and thus uranium demand) will almost certainly decline because of long-standing problems (the aging reactor fleet, hopeless economics, etc.) and a new, serious problem ‒ deep economic recession resulting from the covid-19 pandemic. Only the Murdoch press would publish the claim that 20 reactors will be turned on within the next 12 months without noting that the claim is absurd. As of mid-May, the IAEA’s database records zero reactor start-ups in 2020, zero construction starts, and two permanent closures.28

Even with the significant price increases over the past month, prices would need to roughly double before there is significant investment in new mines.

Speculators selling to sellers

Ironically, according to March 2020 data from UxC, the largest buyer in the spot market is Cameco.15 As noted, Cameco is producing far less uranium than it is buying on the spot market … so the company is partly responsible for driving the spot price increase and it is losing from the price increase rather than profiting. Most of the recent uranium sales are not from producers but from traders, with no more than a “smattering” of demand from nuclear utilities.29

FNArena asks: “How long can this speculator-driven spot price rally last?” And provides this answer: “Ask the virus.”29

Bailouts

Uranium companies have their hands out for as much pandemic-related corporate welfare as they can get. In the US, for example, Energy Fuels Resources and Ur-Energy USA are calling for a US$150 million bailout.30 Seventy-five groups signed a letter opposing the proposal, noting that there is no shortage of uranium nor substantial risk of supply chain disruption, even during the global pandemic.31

The joint letter further states:31

“Uranium mining already has an extensive legacy in the United States of harming the health and wellbeing of local communities, especially tribal communities who bear the brunt of impacts. A 2019 study by the U.S. Department of Health and Human Services, the University of New Mexico, and Navajo agencies found that Navajo Nation citizens, including infants, had elevated levels of uranium in their bodies. Additionally, lung cancer and silicosis have been shown to be frequent occupational hazards for uranium miners ‒ and we know that those with respiratory issues are especially at risk from COVID-19.

“Congress should prioritize spending that creates jobs that heal our lands and waters from mining’s toxic legacy and provide new economic opportunities without further endangering public health and putting national and cultural treasures like the Grand Canyon and Bears Ears at risk. Rather than aiding an industry that has never paid any federal royalties for the more than $300 billion worth of hardrock minerals it has extracted from our public lands, while leaving taxpayers with an estimated $54 billion clean-up bill and ongoing health problems, we urge Congress to invest stimulus funds towards the assessment, reclamation, and cleanup of the hundreds of thousands of abandoned hardrock mines on public and tribal lands, which are currently polluting roughly 40 percent of western headwaters.”

Energy Fuels Resources and Ur-Energy USA are the two companies that led the charge to persuade the US government to establish a 25% quota for domestic uranium supply of US nuclear power plants. That lobbying effort was unsuccessful, but the near-dormant uranium industry in the US won a significant consolation prize: the Trump administration’s proposal in the Fiscal Year 2021 President’s Budget to spend US$1.5 billion over 10 years to establish a national ‘Uranium Reserve’ supplied by domestic mines.32 According to the Department of Energy, the stockpile is expected to support the operation of at least two US uranium mines.32

The stockpile ‒ and the broader strategy in which it is embedded ‒ will also support the nuclear weapons complex. The Department of Energy states:33

“The U.S. has well-defined defense needs that also depend on a healthy nuclear fuel cycle in the long-term. There are currently two defense needs for uranium: low-enriched uranium is needed to produce tritium required for nuclear weapons, and highly- enriched uranium is used to fuel Navy nuclear reactors.”

The uranium industry’s big problem: it’s really small

The most likely scenario is that most uranium mines taken offline in recent months will resume operations over the next year or so and the industry will return to something resembling normality.

The bigger problem for the industry is that it is small, and getting smaller. Last year, uranium requirements for nuclear power plants totaled 67,244 tonnes.34 If we assume that all that uranium was traded at the current long-term price of US$36 / lb U3O8 (ignoring the lower spot price, different prices for uranium from secondary sources, and contracts signed in earlier times at different prices), it is a US$6.4 billion industry. It is pitiful compared to metals and minerals such as iron ore (US$205 billion), copper (US$ billion), and gold (US$133 billion).35

Investment in new uranium projects is near-zero: only four projects are in development globally, with six planned.25 As the World Nuclear Association noted in September 2019, oversupply “has led to a sizable reduction in uranium production levels at existing mines and a sharp decrease in investment in the development of new and existing mines.”36 Investment in nuclear power in recent years has been well short of 10% of investment in renewables.37

References:

  1. World Nuclear Association, ‘World Uranium Mining Production,http://web.archive.org/web/20180305054149/https://www.world-nuclear.org/information-library/nuclear-fuel-cycle/mining-of-uranium/world-uranium-mining-production.aspx
  2. Nuclear Monitor #857, 14 Feb 2018, ‘2017 in review: Uranium is best left in the ground’,https://wiseinternational.org/nuclear-monitor/857/2017-review-uranium-best-left-ground
  3. Matt Griffin, 19 Dec 2018, ‘Why 2019 could be uranium’s break out year’,https://www.livewiremarkets.com/wires/why-2019-could-be-uranium-s-break-out-year
  4. World Nuclear Association, 5 Sept 2019, ‘The Nuclear Fuel Report: Global Scenarios for Demand and Supply Availability 2019-2040’,https://www.world-nuclear.org/our-association/publications/publications-for-sale/nuclear-fuel-report.aspx
  5. Robin Bromby, 14 May 2020, ‘Uranium supply ‘fragile and precarious’ with shortages inevitable from 2023′,https://smallcaps.com.au/uranium-supply-fragile-precarious-shortages-inevitable-2023/

See also: Barry FitzGerald, 8 March 2020, ‘Confidence is brewing, is the uranium renaissance upon us?’, https://stockhead.com.au/resources/barry-fitzgerald-confidence-is-brewing-is-the-uranium-renaissance-upon-us/

  1. Nuclear Monitor #880, 19 Nov 2019, ‘Yellowcake blues: Uranium bulls “as rare as white unicorns”‘,https://wiseinternational.org/nuclear-monitor/880/yellowcake-blues-uranium-bulls-rare-white-unicorns
  2. Nuclear Monitor #823, 4 May 2016, ‘Uranium on the rocks; nuclear power PR blunders’,https://www.wiseinternational.org/nuclear-monitor/823/uranium-rocks-nuclear-power-pr-blundersSee also Cameco, https://www.cameco.com/businesses/uranium-operations
  3. Greg Peel, 27 Aug 2019, ‘Uranium Week: Activity Reawakens’,www.fnarena.com/index.php/2019/08/27/uranium-week-activity-reawakens/
  4. Nuclear Monitor #862, ‘Paladin Energy puts second African uranium mine into care-and-maintenance’, 8 June 2018,https://www.wiseinternational.org/nuclear-monitor/862/paladin-energy-puts-second-african-uranium-mine-care-and-maintenance
  5. Nuclear Monitor #880, 19 Nov 2019, ‘Yellowcake blues: Uranium bulls “as rare as white unicorns”‘,https://wiseinternational.org/nuclear-monitor/880/yellowcake-blues-uranium-bulls-rare-white-unicorns
  6. Rosatom, April 2020, Rosatom Newsletter #228, ‘Nuclear Responds to Coronavirus’,http://rosatomnewsletter.com/2020/04/22/nuclear-responds-to-coronavirus/
  7. Bevis Yeo, 8 April 2020, ‘World’s largest uranium miner mothballs all mines for 3 months, small caps rally’,https://stockhead.com.au/resources/worlds-largest-uranium-miner-mothballs-all-mines-for-3-months-small-caps-rally/
  8. World Nuclear Association, 7 April 2020, ‘Kazatomprom updates operations under COVID-19 lockdown’,https://www.world-nuclear-news.org/Articles/Kazatomprom-updates-operations-under-COVID-19-lock
  9. FNArena, 14 April 2020, ‘Uranium Week: Further Supply Cuts’,https://www.fnarena.com/index.php/2020/04/14/uranium-week-further-supply-cuts/
  10. Rosatom, April 2020, Rosatom Newsletter #228, ‘Nuclear Responds to Coronavirus’,http://rosatomnewsletter.com/2020/04/22/nuclear-responds-to-coronavirus/
  11. David Dalton, 15 April 2020, ‘Cameco Extends Suspension Of Production At Cigar Lake Mine’,https://www.nucnet.org/news/cameco-extends-suspension-of-production-at-cigar-lake-mine-4-3-2020
  12. Cameco, Nov 2019, ‘Quarterly Reports – 2019 – Q3’,https://www.cameco.com/media/news/cameco-reports-third-quarter-results-2
  13. Greg Peel, 10 May 2020,https://www.fnarena.com/index.php/2020/05/19/uranium-week-light-at-the-end-of-the-tunnel/
  14. https://www.facebook.com/permalink.php?story_fbid=167024938100235&id=106938830775513
  15. SightlineU3O8, 28 March 2020, ‘Namibia Halts Mining Operations to Curb Spread of Covid-19’,https://sightlineu3o8.com/2020/03/namibia-halts-mining-operations-to-curb-spread-of-covid-19/
  16. World Uranium Mining Production,https://www.world-nuclear.org/information-library/nuclear-fuel-cycle/mining-of-uranium/world-uranium-mining-production.aspx
  17. Purepoint Uranium, 7 April 2020,https://purepoint.ca/industry_news/covid-19-shuts-down-over-50-of-the-worlds-uranium-production/,’COVID-19Shuts Down Over 50% of the World’s Uranium Production’
  18. https://www.cameco.com/invest/markets/uranium-price
  19. https://twitter.com/PurepointU3O8/status/1261287429392207873
  20. Tim Boreham, 4 May 2020, ‘Time For Yellowcake’s Day In The Sun?’,https://www.sharecafe.com.au/2020/05/04/time-for-yellowcakes-day-in-the-sun/
  21. Nick Evans, 15 April 2020, ‘Uranium stocks soar as stockpiles dwindle’, The Australian.https://www.theaustralian.com.au/business/mining-energy/uranium-stocks-soar-as-stockpiles-dwindle/news-story/2367bd229719b2406716772c5ef79f71
  22. International Energy Agency, April 2020, ‘Global Energy Review 2020’,https://www.iea.org/reports/global-energy-review-2020
  23. IAEA, Power Reactor Information System,https://pris.iaea.org/PRIS/
  24. FNArena, 22 April 2020, ‘Uranium Week: Squeeze Is On’,https://www.fnarena.com/index.php/2020/04/22/uranium-week-squeeze-is-on/
  25. Greg Peel, 19 May 2020, ‘Uranium Week: Light At The End Of The Tunnel’, https://www.fnarena.com/index.php/2020/05/19/uranium-week-light-at-the-end-of-the-tunnel/
  26. 15 April 2020, ‘Opposition to Uranium Mining Industry Bailout’,https://protectnps.org/2020/04/15/opposition-to-uranium-mining-industry-bailout/
  27. Department of Energy, 11 May 2020, ‘Building a Uranium Reserve: The First Step in Preserving the U.S. Nuclear Fuel Cycle’,https://www.energy.gov/ne/articles/building-uranium-reserve-first-step-preserving-us-nuclear-fuel-cycle
  28. US Department of Energy, April 2020, ‘Restoring America’s Competitive Nuclear Energy Advantage: A Strategy to Assure U.S. National Security’,https://www.energy.gov/sites/prod/files/2020/04/f74/Restoring%20America%27s%20Competitive%20Nuclear%20Advantage_1.pdf
  29. https://www.world-nuclear.org/information-library/facts-and-figures/world-nuclear-power-reactors-archive/reactor-archive-december-2019.aspx
  30. Gavin Mudd, 2019, Submission to Standing Committee on Environment and Energy, House of Representatives, Parliament of Australia, Inquiry into the Prerequisites for Nuclear Energy in Australia,https://www.aph.gov.au/DocumentStore.ashx?id=f56bb200-edcc-463c-9bd7-06357450c133&subId=670300
  31. World Nuclear Association, 5 Sept 2019, ‘The Nuclear Fuel Report: Global Scenarios for Demand and Supply Availability 2019-2040’,https://www.world-nuclear.org/our-association/publications/publications-for-sale/nuclear-fuel-report.aspx
  32. https://www.worldnuclearreport.org/The-World-Nuclear-Industry-Status-Report-2019-HTML.html#fig38

May 28, 2020 - Posted by | AUSTRALIA - NATIONAL, uranium

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