COVER STORY | REPLACING RUSSIAN FUEL A global realignment
The uranium and nuclear fuel markets were already in a turbulent phase when the Ukrainian invasion placed Russia beyond the pale for many countries. There’s no doubt that has shaken global uranium markets, but the slow pace of change in the sector is proving useful in managing risk. Janet Wood reports
THE RUSSIAN INVASION OF UKRAINE “sent a shiver down the spine of nuclear fuel buyers around the world,” said Tom Gitsel, chief executive of Canadian uranium miner Cameco, talking through the company’s first half results in June. He pointed out that “the global nuclear industry relies on Russia for approximately 14% of uranium concentrates, 7% of conversion supply and 39% of enrichment capacity”. Phillipe Knoche, chief executive of state-backed French
Janet Wood
Expert author on energy issues
nuclear front-end company Orano, in his company’s half-year presentation on 29 July, was keen to stress that the nuclear industry was relatively immune to short-term shocks. Knoche said there was, “no strong disruption of the market,” noting that uranium and nuclear fuel buyers do not revisit their contracts every half year or year, instead relying on longer-term contracts, so they have some flexibility in when to return to the market. The Russian invasion has shaken the market at a time when it was already changing. Even before that event there was “an unprecedented global realignment occurring in the global nuclear fuel cycle,” Gitsel said. He said that in his markets, “durability” – the visibility of a robust future pipeline of orders – was better than he had ever seen it. He put that down to three continuing factors: Net Zero targets (which he said now cover 90% of the global population); the ongoing need to lift a third of the world’s population out of ‘energy poverty’; and the need to grow power grids and provide users with consistent, baseload power. Nuclear is at the “centre of that triangle,” he said. But Russia’s invasion of Ukraine has fundamentally
changed even those major drivers of nuclear development. Many countries now have to manage those requirements
and move beyond the current energy crises: “pivoting away from Russian energy without jeopardising those NZ commitments”. Gitsel described it as a wake-up call for some countries which had been too focused on one part of the triangle: “Net Zero made them forget about providing baseload and power security. They have been left relying on Russian energy supplies.”
Uranium supplies Gitsel was confident about growth in the long- and medium-term future of nuclear, but he was cautious about whether the conditions were in place for more uranium extraction. Instead, it is likely to be slow to respond to rising demand. “For some time now we have said that the uranium
market is as vulnerable to a supply shock as it has ever been, due to persistently low prices,” Gitsel explained. He referred to supply curtailments in existing productive capacity, along with a lack of new developments, at a time when deepening geopolitical and origin risk – due to concentration of supply and regionalisation – are affecting the availability of critical minerals. What is more, the industry no longer has a stock of secondary supplies that it could rely on to fill the gaps in the past. All these internal factors suggest pressure for expansion
from uranium suppliers, now potentially boosted by some countries’ wish to move away from Russian supply. But Gitsel for one said Cameco would “maintain discipline” in any expansion of capacity, not taking major investment steps until the company has long-term contracts signed with customers. The industry is also facing external
Above: Uranium mining is heading for a shake-up following the invasion of Ukraine 18 | September 2022 |
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