For deliveries under long-term uranium contracts, there are two prevalent pricing mechanisms:

• Specified Pricing, in which the price is either a fixed price, a series of fixed prices, or a base price plus adjustment for inflation to the date of delivery. The adjustment mechanism is usually either a combination of published indexes, or a fixed annual percentage rate. This mechanism was used almost exclusively during the nuclear industry's infancy. It was first typically used in sales of steam turbines and electrical equipment to utilities, and was later adapted to the sale of nuclear fuel.

• Market-Related Pricing, in which the price is based on the uranium spot market price at or near the time of delivery, and/or some other published market index, such as the average U.S. import price. In most instances the price is the market price less a discount (or plus a premium). The discounts are usually fixed, but in some cases are variable, increasing as the market price increases. Market-related price mechanisms frequently include a floor price below, which the contract price may not fall. The floor, which protects the seller, is usually either a base adjusted for inflation, a fixed price, or a production cost-related mechanism. In some cases, the floor used has been a government-specified floor, which is the official floor price of the country that has jurisdiction over the producers' production and marketing operations. Market-related price mechanisms also frequently include a ceiling price above, which the contract price may not rise. The ceiling, which protects the buyer, is usually a base adjusted for inflation or a fixed price.

Although dominant throughout history on a worldwide basis, specified and market-related price mechanisms are not the only types utilized. There exist three additional broad categories of price mechanisms, including "negotiated," "hybrid," and "cost-related" pricing. Negotiated price contracts are defined as those in which prices are to be agreed to periodically (usually annually) by the buyer and seller, and may include the use of an expert or another form of arbitration in the event the parties are unable to agree. Hybrid pricing is that in which a market index, such as the spot price, is averaged with either a base-escalated, fixed, or cost-related price. Hybrid pricing frequently involves the use of complex formulae. Cost-related pricing is that in which the price is tied to the cost of production from the uranium mine. Usually it is cost plus some margin for profit. Cost-related price mechanisms, however, have been rarely used since the early Sellers' Market period.

In recognition of the importance of the long-term base prices in the nuclear fuel markets, TradeTech began to publish its Long-Term Prices in March 1996. This indicator is TradeTech's "judgment of the base price at which transactions for long-term delivery of U3O8 (or conversion or SWU) could be concluded as of the last day of the month, for transactions in which the price at the time of delivery would be an escalation of the base price from a previous point in time."

The UF6 conversion market is most-frequently characterized by contract prices of the specified type, usually a base price escalated up to the date of delivery.

For the long-term enrichment market, through about 1993 the "bench-mark" pricing mechanism was the published price of the U.S. government entity (AEC/ERDA/DOE) providing enrichment to the industry. In fact, the early Soviet contracts with Western European countries were typically priced at a discount from the published AEC/ERDA/DOE prices. For the European enrichers, contracts have nearly always been base-escalated pricing, with prices (and indexes) denominated in the enricher's local currency for domestic customers or in U.S. Dollars outside the enricher's home region.

Attempts by some U.S. utilities to obtain enrichment contracts with market-price-related terms have been unsuccessful. However, a new feature of some enrichment contracts is that the utility buyers furnish the electric power required to produce some portion or all of their SWU purchased under the contract. The initial European contracts along these lines were the 1995 renewals of contracts between EURODIF and two of its equity holders. In the U.S.A., Ameren Corporation (formerly Union Electric Company of St. Louis) is believed to be the first to sign such a contract with USEC.

Natural uranium (U3O8 and UF6) is nearly always sold by "book transfer" at a processing facility, after being delivered to the facility, and sampled and weighed by the processor. Although uranium is physically delivered to the facility under the ownership of a given entity, the delivered uranium is most often processed not in identifiable batches, but rather in a continuous processing stream. The processor typically has the right to use the delivered material as "working inventory" and, thus, ownership of the uranium is actually a book entry in the processor's inventory records. It is very rare for there to be a physical lot that is identified with a given owner. A "delivery" under a sales contract is then made by the seller giving notice to the facility owner that the uranium ownership is to be transferred from the seller's storage account to the buyer's storage account at the facility. (Both buyer and seller must have previously established storage accounts at the facility.)

Book transfer has several advantages over physical delivery:

• Delivery can be at any date deemed by the parties, since the material doesn't have to be physically transported and, thus, subject to timing uncertainties;

• Any lot size convenient to the buyer and seller can be transferred, rather than being constrained by the physical sizes of containers;

• The delivery is "certified" by a third party (the facility owner), since the material must exist in the seller's account to be transferred and the facility owner will then notify both parties that such ownership transfer has been made; and

• The transaction is kept confidential among the buyer, seller and facility owner, since there are no reporting requirements, as for example with transportation documents.

The sale of processing services in the spot market can be made by parties that have no processing facilities but do have title to processed material, in a slightly more complicated way than a straight sale of uranium products. For example (see Figure), a holder of natural (i.e., unenriched) UF6 inventory can sell UF6 conversion services by, in essence, exchanging some of its natural UF6 for the same amount of U3O8 that would have been delivered under a processing contract, and then being paid for the UF6 conversion services contained in that exchanged UF6. In such a case, the buyer and seller typically notify the owner of the facility at which the respective lots are being stored to carry out a book transfer of the seller's UF6 to the buyer's account and the buyer's U3O8 to the seller's account. These transfers can even be made at separate facilities, so that the buyer may deliver its U3O8 at one facility and receive its UF6 at another facility, thereby avoiding the need to incur a transportation cost.

Since most processing contracts are set up with buyer's delivery of U3O8 at a conversion facility and delivery taken of UF6 at an enrichment facility, the converter pays the transportation charge from his facility to the enrichment plant (the next processing stage). This is a result of the fact that it has generally been a buyers' market, so that the seller is expected to incur the transportation cost to the buyer's designated facility. However, there is currently a great deal of uncertainty about the cost impact of future regulations for shipping UF6 from North America to Europe, and this has caused recent offerers of conversion services or natural UF6 to require their new buyers to absorb the cost of this transportation cost increase, whatever it may develop to be.