Nuclear giants stockpile fuel while price is cheap

June 01, 2010

Times Online

Some of the world’s biggest energy companies are stockpiling the nuclear fuel used to power reactors as they try to capitalise on rock-bottom uranium prices.

An oversupply of nuclear fuel on international commodity markets has followed five successive years of rapid growth in uranium ore production in Kazakhstan, which has nearly quadrupled its output since 2004.

Raw uranium prices have tumbled to around $40 per pound — almost one quarter of the levels of $140 in 2007.

Ed Sterck, uranium analyst at Bank of Montreal, said that the low price was encouraging nuclear power station operators such as Exelon, of the United States, Germany’s E.ON and EDF, of France, to boost their stocks of nuclear fuel.

The best way to establish the amount of nuclear fuel being held by energy companies is to examine the level of buying activity in the spot uranium market, Mr Combs said. UxC data showed that during the first three months of 2010, about 13 million pounds of uranium was bought and sold in the spot market. That compares with 20 million pounds during the whole of 2007 — or an average of five million pounds per quarter.

“There is a lot of evidence that utilities have been building up their inventories of uranium. It’s cheaper for them to buy it on the spot market than to strike long-term contracts.” Mr Combs said that detailed information about stockpiles held by individual companies was hard to obtain as it is considered commercially sensitive.

Converting raw uranium ore into nuclear fuel is a complex process. Energy companies tend to buy the ore directly from mining companies such as Cameco or BHP Billiton, or from a commodity broker. Then they contract specialist companies such as Tenex, of Russia, or Areva, of France, to process this into nuclear fuel rods that can be placed inside a reactor.

Nik Stanojevic, mining analyst at Brewin Dolphin, said that prices had fallen sharply after output from Kazakhstan increased. It has risen to 13,665 tonnes in 2009, up from 3,719 tonnes in 2004, ansd the country now supplies about 27 per cent of the world’s total mined uranium production — 50,338 tonnes in 2009.

About one third of the world’s total supply of nuclear fuel comes from Russian nuclear weapons that have been decommissioned as part of a disarmament agreement struck with the United States at the end of the Cold War. These supplies are being gradually depleted and are expected to fall away steadily in the next few years.

Source: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7141390.ece