The international price of uranium, which is used as a fuel for nuclear power generation, has continued to rise. It has risen by 50% from the end of 2022 to a new high in about 12 years. The background is the movement to revisit nuclear power generation in various countries as a result of heightened awareness of energy security in the wake of Russia’s attack on Ukraine. After the Fukushima Daiichi nuclear power plant accident due to low prices and led to the stagnation of mine development, this factor also makes the price increase intensified.
The spot price for uranium concentrate was $72.75 a pound on October 2, according to UxC, a US research firm. It surpassed the previous high of 63.75 dollars per pound set in April 2022 after Russia invaded Ukraine and was the highest since 2011, just before the March 11 Great East Japan Earthquake.
Driving uranium prices is the expectation of expanding demand for nuclear power. According to a report released by the World Nuclear Association (WNA), global nuclear power generation capacity is expected to reach 1.8 times its current level by 2040, increasing uranium demand to twice its current level.
According to the Japan Atomic Power Industry Association (JAPIA), as of January 2023, there were 431 operational nuclear power units worldwide, 72 under construction and 86 planned. Among them, China and India have the most prominent plans. China has 53 nuclear units in operation, 24 under construction and more than 23 planned. India has 22 nuclear units in operation, 11 under construction and 12 planned. Countries that previously had no nuclear power, such as Turkey and Egypt, have also begun to see movement towards new nuclear power plants.
Among advanced countries, Britain and Sweden are also moving to build new nuclear power plants, and discussions are underway in Europe and the United States to build or extend the operation period. As decarbonisation accelerates, countries are taking a fresh look at nuclear power without the use of fossil fuels. Finland, which has not invested in new nuclear power for 40 years, also opened Europe’s largest nuclear power plant in April. In the United States, new nuclear power plants are being built for the first time in 30 years.
In May this year, Japan also passed an amendment to its energy-related laws, the “GX (Green Transition) Decarbonized Power Supply Law.” The law explicitly calls for the efficient use of nuclear power for the sake of reducing greenhouse gas emissions and stabilizing electricity supply, a change from the policy of curbing nuclear power that has been adopted since the Fukushima Daiichi nuclear power plant accident.
International uranium prices have fluctuated according to countries’ nuclear power policies. In the 2000s, the Bush administration in the United States promoted the re-evaluation of nuclear power, and countries launched new construction plans. Uranium prices have been hovering high in what has been dubbed the “nuclear Renaissance.” In 2007 it rose to $136, the highest since data began in 1987.
However, since the Fukushima Daiichi nuclear power plant accident, the momentum for promoting nuclear power plants has suddenly shrunk around the world. Uranium prices have fallen, hovering around $20 to $40.
This time, the price surge is also mainly due to uranium supply concerns. As uranium mine developers adjust their development plans due to low prices, they do not have the capacity to rapidly increase supply. Cameco, a large Canadian uranium mining company, stopped production at its main mine in Canada in 2018. Although production restarted in November 2022, there are still talent shortages and supply chain issues, and the production forecast of major mines in 2023 has been lowered.
An official of a large Japanese trading company said：“Suppliers have limited supply capacity, and the world continues to make full use of nuclear power plants. In the future, the price will gradually increase. ”With uranium prices high, the performance and stock prices of mining companies have also held up well. Cameco’s shares are at their highest level in about 16 years. The share price of Kazakh state-owned company Kazatomprom, a global giant, has also risen by about 40% in London since the beginning of the year.
The supply chain of fuel for nuclear power also faces significant geopolitical risks. Kazakhstan, the world’s largest producer of uranium, sends its uranium by rail to Russian ports for export. While new transport routes are being developed that do not rely on Russia, there are still concerns about delays and Russian cuts to the transport network.
It is widely believed that a coup in Niger in West Africa, which accounts for 4 per cent of world production, will stall supply. France, the former host of Niger, is also highly dependent on nuclear power. Niger has close ties with France and exports a lot to the European Union.
To be used as a fuel for nuclear power generation, uranium needs to be processed into enriched uranium. Russia’s enriched uranium production capacity accounts for 40-50% of the world’s total production. The U.S. and others have also begun discussing a ban on imports of Russian-produced enriched uranium.
However, the surge in uranium prices has had a limited impact on electricity prices. According to Japan’s Ministry of Economy, Trade and Industry (METI), as of 2020, nuclear power will account for about 15% of the cost of fuel in the cost of power generation. Compared with liquefied natural gas (LNG) thermal power generation and oil thermal power generation, which account for 50% to 60%, the fuel cost is relatively low.
Masato Nabeshima, a senior researcher at Japan’s Overseas Electric Power Research Association, said, “Uranium concentrate before enrichment and processing accounts for about 30% of the cost of nuclear fuel, so even if the price of uranium concentrate rises, it won’t have a big impact on electricity costs.” Instead, environmental protection and scrap pile costs will increase as the cost of maintaining nuclear power plants.
With the high price of uranium, will the once-stalled development of mines re-accelerate? If supply-side topics, including geopolitics, are not resolved, they will become bottlenecks in the nuclear power plant programs that countries are advancing.