Why uranium will not become cheaper and the reasons for the fourfold increase in prices for its conversion to Kommersant were told by the First Deputy General Director of Techsnabexport (part of Rosatom) Andrey Tovstenko.
– Why did the rise in prices for natural uranium, which began last year, did not last long and the market stagnates again?
– I would not use the word “stagnation”. I am convinced that the trend of a gradual rise in prices, the main driver of which will be the inevitable reduction in the production of uranium at a low cost, will continue for the long term. In addition, the warehouse stocks formed after the accident at the Fukushima-1 NPP continue to put pressure on prices, although the influence of the factor decreases as excess stocks decrease.
The current local decline in spot prices is associated, in my opinion, with the expectations of a recovery in uranium production at one of the largest mines, which was stopped due to the coronavirus pandemic.
– What price for natural uranium do you think is sufficient for the exploration of new deposits?
– If we talk about this decade, then the incentive for the development of new fields, according to our estimates, should be at least $ 45-50 per pound.
– What plans does Uranium One, which is part of the TENEX management loop, have for uranium mining projects?
– The company is mining at six mines in Kazakhstan in the format of joint ventures with NAC Kazatomprom. In addition, the Uranium One portfolio includes projects at various stages of completion in the United States and Africa. Their prospects, as well as the initiation of new projects, will also depend on how the market situation will develop in the future.
– Who are the main buyers now? Has their strategy changed?
– On the spot, the main buyers are traders and junior companies seeking to buy uranium in the low market. As for the end consumers – energy companies, their strategy is based on the formation of long-term relationships with suppliers, although recently they prefer medium-term contracts for three to five years.
– How does the cost of uranium affect the price of nuclear power generation?
– The fuel component in the cost of electricity produced by nuclear power plants accounts for about 20%, of which about half is the cost of natural uranium. Obviously, with such a cost structure, the impact of natural uranium prices on the cost of a megawatt-hour is not critical.
– Why has the price for conversion services increased so much – the conversion of uranium oxides into uranium hexafluoride?
– In terms of conversion, the rise in prices was indeed very significant. For a long time, prices for conversion were at a very low level, at some moments dropping below $ 5 per 1 kg of uranium. Now the spot price quotes exceed $ 20 per 1 kg. Moreover, this is not only speculative growth: it is obvious that the old price was clearly insufficient for the development of new industries, so I do not expect a strong change in prices.
The main reason for the growth is the lack of capacity. The US uranium conversion plant has been idle since 2017, with new conversion facilities in France reaching only a quarter of design capacity at the end of 2020. Chinese manufacturers are mainly focused on domestic needs.
As a result, only the capacities of Canada and Russia remained on the market. The conversion market is certainly interesting for Russia. Russian Conversion is sold mainly as part of a higher value-added product – in enriched uranium or finished nuclear fuel, but at the request of the customer, we also provide pure conversion services.
– What are your expectations for the demand for natural uranium?
– Obviously, demand will grow smoothly as new nuclear power plants are built: according to the forecast of the World Nuclear Association, by 2030 the global nuclear power capacity should grow by 70 GW – up to 462 GW. Much of this growth comes from China. Other countries will also make their contribution, including the “newcomer countries”, where today “Rosatom” is building or is planning to build nuclear power units. In the long term, an increase in demand for uranium will also be facilitated by the implementation of projects to create reactors of small and medium power.
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