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Jan 31, 2014 – Kazakhstan at Center of 2013 Uranium Production

Jan 10, 2014 – 2014: The Uranium Market & Japan in Transition

Jul 5, 2013 – DOE Releases Updated Excess Uranium Inventory Management Plan

Kazakhstan at Center of 2013 Uranium Production
The following is an InFocus piece published in the January 31, 2014 issue of the Nuclear Market Review.

Earlier this week, Kazatomprom released its 2013 uranium production figures and the state-owned uranium producer once again achieved significant growth in output. Kazakhstan continues to play an important role in the global uranium industry, and according to preliminary data, it will likely maintain the position as the world's largest uranium producer in 2013, a title the Central Asian nation has held annually since 2009.

Reporting 22,500 tU (58.5 million pounds) produced and 23,400 tU3O8 (51.6 million pounds) designated as exports on contracts, Kazakhstan’s total output supplied approximately 38 percent of 2013 global uranium production, according to preliminary total estimates. Accounting for its shares in various joint ventures, NAC Kazatomprom JSC itself was responsible for 12,600 tU (32.8 million pounds) or over 21 percent of global production, with 10,200 tU3O8 (22.5 million pounds) booked as sales on contracts. Revenue figures are forthcoming in the company’s annual financial report, which is expected to be released in April.

Kazatomprom’s reported 2013 production represents a 7.7 percent increase over 2012 figures (20,900 tU  [54.3 million pounds U3O8 ]). In addition to its uranium production, the company also drilled 2,300 exploratory wells as part of an ongoing initiative to secure its uranium resource base. Continued exploration and increased production have some in the industry looking towards the Asian nation for signals of either continued growth or tempered production in the face of current uranium market prices.

Kazakhstan's Uranium Legacy
Kazakhstan is home to 25 percent of the world’s uranium reserves, second only to Australia. Yet, despite its vast resources, Kazatomprom has recently indicated that it intends to slow the rate of increase in uranium production it has pursued for the last decade. In stark contrast to its 2008 goal of quintupling production to over 70 million pounds by 2015, recent market conditions have compelled Kazatomprom to announce that it would curtail expansion of its uranium production and maintain output at 2013 levels. In late 2013, Kazatomprom Chairman Vladimir Shkolnik stated, “We’ve put the brakes on implementing uranium output expansions. The same goes for other elements of the fuel cycle.”

While uranium mining has been conducted in Kazakhstan for over 50 years, production has increased more than tenfold in the last decade from 4.5 million pounds U3O8 in 2000 to 58.5 million pounds U3O8 in 2013. Figure 1 shows uranium production growth from 2002-2013. Kazakhstan became the world’s leading uranium producer in 2009. Over the last decade, Kazatomprom’s revenue has increased in line with its production, achieving a noticeably rapid rise in the post-2008 period. Only recently has revenue faltered, due in large part to declining uranium prices, but it still remains above US$2 billion dollars (Figure 2). While continued increases in production are clearly being rewarded, diminishing returns are possible should prices resist a recovery in the coming years. In 2012, the majority of Kazatomprom’s sales were to China.

Figure 1

Figure 2

Exploration in the second half of the twentieth century indicated 50 uranium deposits, located in six provinces, most in the south-central regions of the country. Today, Kazakhstan is home to 16 active uranium mines—five are wholly owned by Kazatomprom and the remaining 11 are established joint ventures with AREVA, Uranium One (ARMZ), China Guangdong Nuclear Power Group, and Cameco.

A Role in the Global Nuclear Industry
The Kazakh government has pursued cooperative agreements with foreign governments and has been at the center of a Nuclear Threat Initiative proposal to create an international nuclear fuel bank (a low-enriched uranium stockpile owned and managed by the International Atomic Energy Agency available as a 'last-resort fuel reserve ' for nations developing nuclear power programs based on foreign sources of fuel supply services). Meanwhile, Kazatomprom has been active in developing facilities dedicated to water desalination, medicine, and the production of industrial consumables, in addition to its substantial uranium mining activities. In 2013, Kazatomprom opened a representative office in the USA, meant to help the company address opportunities in the North American market.

Kazakhstan currently directs the largest economy among the five Central Asian states. Since gaining independence, the country has enjoyed strong gross domestic product growth, which is expected to increase by 6 percent in 2013, 7.5 percent in 2014, and 7.1 percent in 2015, pushing Kazakhstan into the top tier of economic expansion. Underpinning this growth are initiatives such as the State Program for Accelerated Industrial-Innovative Development of Kazakhstan in 2010-2014, developed in accordance with the Strategic Plan for the Development of Kazakhstan till 2020. Kazakhstan has a deep history of involvement in all aspects of the nuclear sciences, and its latest incarnation as the world’s largest uranium producer is merely the most recent achievement by a country that looks to capitalize on a fully integrated nuclear fuel cycle services industry.

Editor's Note: An in-depth analysis of uranium production in Kazakhstan is featured in the upcoming Uranium Market Study 2014 Issue 1, in which TradeTech takes a forward-looking view of Kazatomprom’s uranium production trend.

2014: The Uranium Market & Japan in Transition
The following is an InFocus piece published in the January 10, 2014 issue of the Nuclear Market Review.

Since the earthquake- and tsunami-induced accident at Japan’s Fukushima Daiichi nuclear station in March 2011, the nuclear fuel industry has been proceeding with caution as it seeks assurances of market stability and direction. In addition to ongoing challenges to decommission the Fukushima reactors, other uncertainties, including potential Japanese inventory sales, ongoing US Department of Energy uranium inventory sales, political unrest and production cutbacks in certain regions, as well as supply-side consolidation, have continued to spur periodic market volatility. Today, the nuclear fuel market remains in a state of transition as participants continue mapping a course toward a future that sustains nuclear power growth and stability in the long term.

Japan’s Nuclear Power Sector in Transition Last month, Tokyo Electric Power Co. (TEPCO), operator of the Fukushima Daiichi nuclear station in Japan, said it would decommission two reactors at the site that were not badly damaged by the earthquake and tsunami in 2011, bowing to public pressure that the facility be permanently shut down. Workers have begun to remove fuel rods from one of the four Fukushima Daiichi reactors that were severely damaged by the March 2011 accident.

TEPCO had delayed making a final announcement regarding Units 5 and 6 (760 and 1067 MWe BWRs), while negotiations continued about the financing of the decommissioning process. The executive board has now acknowledged there will be no attempt to generate electricity from the Fukushima Daiichi plant again. While not an unexpected decision, it once again drew attention to the considerable challenges Japan’s nuclear power sector continues to face more than two years after the devastating accident at Fukushima.

In 2013, seven Japanese utilities applied for Nuclear Regulation Authority (NRA) safety inspections of 16 reactors at 10 plants. A great deal of attention is focused on this process, as passing these inspections is a prerequisite to any return to commercial operation for these units. While the NRA has claimed their safety standards will be the strictest in the world, utilities have endeavored to regain the confidence of both the public and political leaders of their respective prefectures, as the country itself comes to terms with the economic realities of life without nuclear power.

The Japanese government has taken the lead in financing the compensation for Niigata prefecture’s displaced population. So far, the government has allocated ¥9 trillion (US$86 billion) to TEPCO through its Nuclear Damage Liability Facilitation Corp. and maintains a ¥1 trillion (US$9.5 billion) reserve of emergency capital. Decommissioning the Fukushima reactors is estimated to cost ¥1.15 trillion (US$15 billion) and may take 30 years to complete. In December 2013, TEPCO announced a plan to restructure its business, accept early retirement from 1,000 employees, and off-load its compensatory obligation through the formation of a separate company, while becoming a holding company in 2016.

Before the Fukushima event, nuclear provided around 30 percent of Japan’s electricity, yet today that capacity is wholly unavailable. Figure 1 shows the state of Japan’s nuclear fleet, with approximately 10 percent of total capacity (installed and planned) lost and the balance in various states of assessment; 15.6 GWe of capacity is currently under review by the NRA.

Figure 1

With all plants are offline today, the country is spending an estimated ¥3 trillion (US$28.6 billion) on imported oil and natural gas in place of its lost nuclear capacity. This expense has placed great economic pressure on Japan and has created a trade deficit in a country already struggling with long-term economic stagnation. The effects are not limited to the electricity sector, either. The shutdown of Japan’s nuclear fleet has sent a ripple effect through the economy--while utilities have raised rates and imported fuels at a premium cost, communities surrounding nuclear plants have witnessed declining retail sales at businesses located near shuttered plants.

Surprisingly, some utilities themselves have remained profitable, though not by traditional retail sales of electricity alone. Five of Japan’s nine regional utilities posted a net profit for the latest reporting period, but many point to delayed maintenance work, rate hikes, and government support as the source of positive earnings. However, these results are likely unsustainable; Kyushu Electric Power Co. is posting deficits of ¥1 billion (US$9.6 million) each day as a result of its idled nuclear plants. TEPCO estimates that restarting its Kashiwazaki Kariwa station, the largest nuclear power facility in the world, could save ¥105 billion (US$1 billion) per month in fuel costs.

In 2013, the economic effects of reactor closures compounded, and utilities welcomed the opportunity to invite safety inspectors to their plants. Four utilities operating 10 PWR units at seven plants applied for inspections in August, while recently, ABWRs and BWRs have also joined the list of candidates for restart.

Officials are also warming to the idea of plants returning to operation. Haruhiko Izumida, governor of Niigata prefecture recently lifted his objections to nuclear power after TEPCO agreed to significant safety upgrades at Kashiwazaki Kariwa. TEPCO applied for inspections of Units 6 and 7 in September last year, and hopes to have all seven units in operation by 2016. Tohoku Electric Power Co. recently applied to have Onagawa Unit 2 inspected and intends to apply for inspection for Units 1 and 3 in the near future. Chugoku Electric Power Co. is seeking to have Shimane Unit 2 restarted, as well.

The NRA has stated its safety inspection process would take a minimum of six months per application; with 10 applications filed in August 2013, this self-imposed six-month deadline is fast approaching. TradeTech assumes, if utilities are permitted to restart these reactors, it will be after extensive review that could take at least six months, and likely 12 months or longer, for the first applicants, with longer review periods likely for BWR plants. Figure 2 shows 16 units currently slated for NRA safety review, with MWe capacity illustrated with green bars and assumed lifetime shown by black bars.

Figure 2

Projected restart dates are noted in orange, taking into account a minimum one-year review process. The effect of these 16 potential reactor restarts on Japan’s uranium requirements is estimated at approximately 5 million pounds U3O8 per year. [top]

DOE Releases Updated Excess Uranium Inventory Management Plan

The following is an InFocus piece published in the July 5, 2013 issue of the Nuclear Market Review.

The US Department of Energy (DOE) released on July 3, its long-awaited “2013 Excess Uranium Inventory Management Plan,” which updates the previous plan released in December 2008, and reflects evolving information, programs, and Department mission needs since the 2008 Plan was issued. The 2013 Plan identifies uranium inventories that have entered the uranium market since the 2008 Plan and those anticipated to potentially enter the market through the end of Calendar Year 2018. While DOE has provided transparency in the categories of material in its excess inventory, a level of uncertainty still remains as there is no clear indication of the quantities and time frames for introducing material into the uranium market in the long term. In addition, the new Plan removes the 10 percent of US requirements guideline for uranium transfers.

DOE notes the 2013 Plan is not a commitment to specific activities beyond those that have already been contracted, nor is it a restriction on actions the Department may undertake in the future due to changing conditions. However, the new Plan does differ from the previous Plan released in December 2008.

One of the most important changes in the new Plan involves the removal of DOE’s previous guideline that uranium inventory transfers should not exceed 10 percent of total annual fuel requirements of all US nuclear plants and should not have an adverse material impact on the US uranium mining, conversion, or enrichment industries.

DOE said, based on experience gained since issuing the 2008 Plan, including the market impact analysis that supported the May 15, 2012 Secretarial Determination, the Department has determined it can meet its statutory and policy objectives through uranium sales or transfers without an “established guideline.”
In addition, the new plan will adhere to the Consolidated Appropriations Act of 2012, which provides that all Secretarial Determinations are only valid for two calendar years. Therefore, DOE will revisit its analyses of market impacts and issue new Secretarial Determinations every two years for transfers, if it seeks to continue transactions covered within the Plan.

DOE has added more flexibility to the new Plan by stating, “changing Departmental priorities may require changes to plans or schedules for sale or transfer of uranium that cannot be anticipated at this time.” This includes the possibility that uranium now directed to national security needs may be declared to be “excess” and, conversely, that uranium now considered to be “excess” could be directed to national security needs.

DOE notes that although the focus of this new Plan includes transactions under consideration by the Department through Calendar Year 2018, the final disposition of its excess uranium inventories could take at least 20 years when all inventories are considered. Other changes include the introduction of one new material group—Off-Spec LEU (5 million pounds U3O8), which was referenced as unspecified material in the 2008 Plan. The 2013 Plan also adds more material (43 million pounds NUe) within the Depleted UF6 category, and greater utilization of the Allocated HEU category.

DOE has reported that remaining excess inventory totals 108.3 million pounds U3O8, which is marginally higher than TradeTech’s previous analysis, which accounted for 107.3 million pounds in remaining DOE inventory. Note: Recent Secretarial Determinations were issue by DOE on May 15, 2012, and March 15, 2013.

In May last year, DOE agreed to provide Energy Northwest with approximately 9,000 tonnes of high-assay depleted uranium, in conjunction with the five-party deal with USEC, Energy Northwest, the Bonneville Power Administration, and the Tennessee Valley Authority, to extend uranium enrichment operations at the Paducah Gaseous Diffusion Plant in Paducah, Kentucky by about one year.

In March this year, DOE issued a Secretarial Determination covering a one-time transaction to transfer 299,000 SWU to USEC, to keep the research, development, and demonstration program for the American Centrifuge Plant project running through June.

The full 2013 Excess Uranium Inventory Management Plan is available at: http://energy.gov/sites/prod/files/2013/07/f2/Excess%20Uranium%20Inventory%20Management%20Plan.pdf. [top]