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The price of nuclear reactor fuel has risen much faster than that of raw uranium since the start of 2022, a sign of the bottlenecks that have built up in the West following Russia’s invasion of Ukraine.
The price of enriched uranium has more than tripled to $176 per unit of separation work — the standard measure of the effort required to separate uranium isotopes — since the start of 2022, according to UxC, a data provider.
Demand for uranium is being driven by renewed interest in atomic energy. However, Russia plays a major role in the multi-step process of turning mined uranium into fuel for a nuclear reactor. This involves converting the uranium concentrate into uranium hexafluoride gas, enriching it to increase the concentration of the type of uranium used for fission, and then processing the enriched uranium into pellets for reactors.
The price of uranium hexafluoride quadrupled over the same period, to $68 per kilogram, indicating that conversion is the main obstacle to nuclear fuel supplies, analysts said. In contrast, the price of uranium ore only doubled.
“Conversion and enrichment prices reflect a much larger supply reduction due to the Russia-Ukraine war and other factors,” said Jonathan Hinze, UxC’s managing director.
“Uranium alone is not enough to explain the impact of prices on the nuclear fuel supply chain.”
Russia controls 22% of the world’s uranium conversion capacity and 44% of its enrichment capacity. These services have been off-limits to some Western utilities since the US ban on Russian uranium, although exemptions are allowed until the end of 2027.
France, the United States, Canada and China are the other countries, besides Russia, that host large-scale conversion sites.
The US government said this week it was closely monitoring whether uranium imports from China were a backdoor for Russian material, after record exports in May when the ban was introduced.
The UK previously contributed to global conversion capacity through the Springfields site, but conversion services were halted in 2014, while the French plant experienced delays in reaching full capacity.
“The conversion market is very, very tight for the simple reason that existing facilities are being cared for and maintained,” Grant Isaac, chief financial officer of Cameco, the world’s second-largest uranium producer, said on an earnings call.
“Due to the delays in getting all the conversion production centres in the Western world up and running at full capacity… conversion has a very good headroom for the coming period.”
While rising nuclear fuel prices threaten to hurt the profitability of power companies, the bigger challenge is ensuring that there is enough investment in mining, conversion and enrichment to meet demand for life extensions of existing and new reactors.
Nuclear fuel companies such as France’s Orano and Britain’s Dutch-German Urenco have pledged to increase their enrichment capacity, but so far none have committed to building new conversion capacity in the West.
Nicolas Maes, Orano’s chief executive, told an industry conference this month that the investments needed for conversion and enrichment were “massive” relative to the size of the companies involved.
He compared Orano’s annual revenues of nearly €5 billion to the €1.7 billion needed to increase its enrichment capacity in southern France by more than 30%.
Johnathan Chavers, director of nuclear fuel and analytics at Southern Nuclear, which operates eight nuclear power plants in the United States, said at the same conference that utilities and nuclear fuel suppliers were unwilling to make “big bets” because of the “chicken and egg problem.”
Nuclear power plant operators are reluctant to sign long-term supply agreements unless the facilities are under construction, which provides certainty about expected delivery times for nuclear fuel, but suppliers are reluctant to make big investments without such agreements to secure them, he said.
