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The price of fuel for nuclear reactors has surged much faster than that of raw uranium since the start of 2022, in a sign of the bottlenecks that have built up in the west following Russia’s invasion of Ukraine.
Enriched uranium has more than tripled in price to $176 per separative work unit — the standard measure of the effort required to separate isotopes of uranium — since the start of 2022, according to UxC, a data provider.
Demand for uranium has been driven by a revival in atomic power. However, Russia plays a significant role in the multi-stage process of turning mined uranium into the fuel for a nuclear reactor. This includes converting yellowcake — uranium concentrate — into uranium hexafluoride gas, enriching it to increase the concentration of the type of uranium used for fission, and then turning the enriched uranium into pellets that go into reactors.
Uranium hexafluoride has jumped fourfold in price to $68 per kg in the same period, indicating that conversion is the biggest bottleneck in the nuclear fuel supply chain, analysts said. In contrast, uranium ore has only doubled in price.
“The conversion and enrichment prices are reflecting a much bigger supply squeeze due to the Russia-Ukraine war and other factors,” said Jonathan Hinze, chief executive of UxC.
“Uranium alone does not tell the whole story when it comes to price impacts in the nuclear fuel supply chain.”
Russia controls 22 per cent of global uranium conversion capacity and 44 per cent of enrichment capacity. Those services are out of bounds for some western utilities following a US ban on Russian uranium, although waivers are allowed until the end of 2027.
France, US, Canada and China are the other countries besides Russia that are home to large-scale conversion sites.
The US government said this week that it is closely tracking whether imports of uranium from China are providing a back door for Russian material, after bumper exports in May when the ban was introduced.
The UK used to contribute to global conversion capacity via the Springfields site but conversion services halted in 2014, while France’s plant has faced delays in getting to full capacity.
“The conversion market is very, very tight for the simple reason that existing facilities are in care and maintenance,” said Grant Isaac, chief financial officer at Cameco, the world’s second-largest uranium producer, on an earnings call.
“Because of the delays in getting all of the conversion-producing centres up to full production in the western world . . . conversion has a very good tail of strength for the next little while.”
While higher nuclear fuel prices are likely to hit the profitability of power companies, the bigger issue is making sure there is enough investment in mines, conversion and enrichment to meet demand from extensions to existing reactors’ lifetime and new ones.
Nuclear fuel companies such as France’s Orano and British-Dutch-German owned Urenco have committed to boosting enrichment capacity, but so far no one has committed to building new conversion capacity in the west.
Nicolas Maes, chief executive of Orano, said at an industry conference this month that investments needed in conversion and enrichment were “massive” compared with the size of the relevant companies.
He compared Orano’s annual revenues of almost €5bn to the €1.7bn needed to expand its enrichment capacity in southern France by more than 30 per cent.
Johnathan Chavers, director of nuclear fuel and analysis at Southern Nuclear, which operates eight nuclear plants in the US, said at the same conference that utilities and the nuclear fuel suppliers were unwilling to make “big bets” due to a “chicken and egg problem”.
Power plant operators are reluctant to sign long-term supply agreements unless the facilities are being built, giving certainty over expected delivery times for nuclear fuel, yet suppliers balk at making big investments without such deals to underwrite them, he said.
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