Uranium miners switch to survival mode despite nuclear rebound

Uranium miners switch to survival mode despite nuclear rebound

GEERT DE CLERCQ

LONDON — Reuters

Published Monday, Oct. 03, 2016 4:22PM EDT

Last updated Monday, Oct. 03, 2016 4:24PM EDT

 

The nuclear industry is gradually recovering from its post-Fukushima slump, but excess capacity keeps uranium prices at record lows, forcing mining companies to mothball mines, slice costs and cut debt as they struggle to survive.

In the wake of the March, 2011, Fukushima disaster, Japan closed its nuclear reactors, which accounted for some 10 per cent of the more than 400 reactors operating globally.

Several other countries including Germany announced plans to exit nuclear, and in the past three years several nuclear reactors in the United States were closed as they could no longer compete with cheap shale gas.

Five years later, only three of Japan’s 42 reactors are back in operation but new reactors brought online in China and other countries have partly made up for the Japanese closures.

In the next few years, eight Westinghouse reactors are expected to open in the United States and China, four Areva reactors in Finland, France and China, and four Kepco-built reactors in United Arab Emirates.

The World Nuclear Association (WNA) says it is feasible that global nuclear electricity production, at around 2,441 terawatt hours (TWh) in 2015, may return to 2011 levels this year and to pre-Fukushima levels in two to three years. In 2010, the last full year before Fukushima, nuclear generation came to 2,630 TWh.

Long-term perspectives have picked up, too.

China plans to build at least 60 nuclear plants in the coming decade, South Africa last month kicked off a major nuclear tender, and Thursday’s signature of the Hinkley Point contract between French utility EDF and the British government opens the way for up to 12 new reactors in Britain.

As nuclear reactors need fuel, all this should be good news for uranium miners, but the radioactive metal last week hit a new decade low of $23.50 (U.S.) a pound.

Uranium, which before the 2008 financial crisis had briefly peaked around $140 a pound in June, 2007, traded around $70 a pound just before the Fukushima disaster and has been on a downward trend ever since.

“It has never been a worse time for uranium miners, although globally the nuclear industry does well,” Alexander Molyneux, chief executive of Australian uranium miner Paladin Energy told Reuters in an interview.

Mining executives partly blame the slump on their customers’ wait-and-see attitude, as utilities believe that the uranium market’s over-capacity will persist for years and see no need to rebuild their dwindling stockpiles.

Demand for uranium is determined by the number of nuclear plants in operation worldwide, but supply and demand are disjointed by huge stocks and uranium’s long production cycle.

In coal, a bulky and inexpensive commodity, there is relatively little inventory on the planet, as it typically takes six to eight weeks between mining it and burning it.

Uranium however has to be mined, converted, enriched and turned into fuel rods in an 18- to 24-month process. And as security of supply is so important and uranium makes up just a few percentage points of the cost of running nuclear reactor, utilities tend to have five to seven years’ worth of inventory.

“At the moment, nobody feels the need to buy and the price is lower every day. We are still waiting for the inflexion point,” Mr. Molyneux said.

In the five years before Fukushima, utilities worldwide bought about 200 million pounds of uranium a year, he said. Although Japan’s consumption averaged only around 25 million pounds a year, when it closed its reactors demand was cut far further, falling by half. European and U.S. utilities saw that the market was over-supplied and reduced inventories, buying less.

Canada’s Cameco in April suspended production at its Rabbit Lake mine while also curtailing output across its U.S. operations, saying market conditions could not support the operating and capital costs needed to sustain production.

Cameco marketing head Tim Gabruch told the WNA conference that “desperate times call for desperate measures.”

Supply adjustments and producer discipline had not yet been sufficient to counter the loss of demand, he said.

“As difficult as those decisions have been, we recognize that those actions may not be enough.”

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on October 3, 2016, in economic impact, political, uranium and nuclear. Bookmark the permalink. Leave a comment.

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