Present world mine output (around 43,000 t U3O8) is little more than half the level of consumption by utilities (78,000 t). The balance comes from inventories held by utilities, recycled material, and substantial amounts fed into the civil cycle from diluted ex-military material.
All scenarios assume that utility stockpiles will be substantially depleted in the next few years, eg by 2006. Recycled material (U & Pu) from reprocessing is not expected to increase markedly, or make a major impact in the market. However, some uncertainty remains about the rate at which Russian (and later, US) military uranium will come on the market. This is high-enriched (often weapons-grade) uranium which is diluted 25:1 to 30:1 with depleted uranium or similar material to bring it to reactor-grade.
The other market factor, as with any mineral commodity, is the rate at which new low-cost producers come into the market. This includes particularly low-cost producers in Russia, Uzbekistan and especially Kazakhstan.
Prices in the medium term are greatly influenced by expectations concerning the rate at which Russian military uranium will actually come on to the Western market (despite agreements which limit it) and by the stockpile of natural uranium held by USEC (much of which was supplied against Russian ex-military uranium marketed by USEC ). They are also affected by the new low-cost production capacity in Australia and Canada.
Whereas in the 1994 study spot prices were projected to rise in real terms to almost US$ 16 per pound U3O8 by 2004 if development of further Australian mines was allowed, the current projection is less than this. (After four years of depressed prices, the September 2003 spot price was US$12.20/lb. Long term contract prices are significantly higher than spot prices over the last few years, eg average Australian FOB price 2002 was A$ 11.73/lb.)
Conversely, if secondary supplies are constrained there is considerable potential for the price to rise significantly in the medium term. However, where uranium prices differ from many other commodity prices is in their dependence on a very steady and predictable demand. What is less predictable is the non-mine portion of the supply.
PROJECTIONS OF AUSTRALIAN OUTPUT
While current federal government policy gives mild encouragement to uranium production, Labor Party policy is still equivocal and there are on record threats to close down any developments which are not actually in production if a Labor government is returned. In addition, several state governments oppose uranium development. This is a disincentive to exploration and development here, accordingly some Australian companies prefer to pursue uranium opportunities offshore, which reduces the medium-term prospects for Australian output.
This uncertainty is occurring as Canadian producers, who are vigorously expanding their production capacity, lock buyers into long-term contracts which will constrain the market for the next decade or more.
Australian production has risen from 4377 tonnes U3O8 in 1995 to 9149 tonnes in 2002-03. Current annual capacity is some 10,000 tonnes. The Honeymoon mine is likely to start up in 2005 as a 1000 t/yr operation. The timing of Jabiluka's start-up is uncertain, and in any case it will progressively replace Ranger output as that orebody is depleted, so is unlikely to add to the national total before 2010.
The impact on regional economies in the states and the Northern Territory was canvassed in the 1994 study and shown to be very significant, especially for the NT.
Sources K. Donaldson, ABARE, Uranium Outlook to 2004-05, Australian Commodities 7,1, March 2000. Access Economics, July 1994, A New Opportunity for Australian Uranium. OECD-NEA & IAEA, 1998-2002, Uranium Resources, Production and Demand.
