The uranium bulls continue to point to the prospects for nuclear growth to 2030. The problem is that most of this will be concentrated in China and Russia. Over half will likely be in China and the Chinese may also become important in supplying reactors to other countries in the 2020s. The Russian domestic nuclear programme is now progressing quite well, and they too will be a key supplier of reactors to other countries in the period to 2030. When the Russians supply a reactor, they invariably include long-term fuel contracts. What is important is that uranium demand will almost certainly fall in the key markets in Western Europe and North America, which are satisfied by the established uranium producers. Many Japanese reactors will undoubtedly restart but it will take a long time to unwind the inventory accumulation there. Those who believe in higher uranium prices take an over-optimistic demand scenario. It can now be argued that the range of possibilities has actually narrowed considerably and it is appropriate to centre discussion on just one main case to 2030. Upper scenarios showing rapid nuclear growth in many countries including plants starting up in new countries now look very unlikely, certainly before the late 2020s. If there is to be a nuclear renaissance, it is now much more likely to happen later, and with a new generation of reactors. On the other hand, predictions that another major accident would shut down nuclear in lots of countries have been negated by the experience of Fukushima. Although there remain some uncertainties, the outlying upper and lower cases are much less credible than before. Uranium market split into three
So we are entering a fifth era of uranium, where the market is split into three. The Chinese will favour investing directly in mines to satisfy their requirements. These (like Husab in Namibia) will not necessarily be at the low end of the cost curve: there are important geopolitical considerations too and the Chinese are keen to get involved directly in the economic development of many countries, particularly in Africa. They are also not going to "play ball" with the established uranium market. Although they will maintain a presence in the spot market and sign further long-term supply contracts with producers, they have learned their lesson from the iron ore market. In that sector their heavy dependence on imports from BHP Billiton, Rio Tinto and Vale has given these producers fantastic profits. The Russians will continue to be significant nuclear fuel exporters but their own market will remain essentially closed to outsiders. They still have secondary supplies to tap into (plenty of surplus HEU remains to be down-blended) and they will follow the Chinese and invest directly in uranium assets if their own domestic production remains constrained. Their recent acquisition of the producer Uranium One can be seen very much in this vein. The established uranium producers will have the remainder of the market to satisfy and that will likely be declining in magnitude. There are bright spots are South Korea and the Middle East (where Saudi Arabia may join the UAE in having a nuclear programme) but the prospects in North America and Europe are not so good. In the United States, the number of operating reactors will fall by 2030, with a small number of new units not sufficient to compensate for closures due to cheap shale gas and the incursion of subsidised renewable energy into power markets. Although reactors may well be licensed for up to 80 years, they will not operate unless the economic fundamentals are right. In Canada too, it seems unlikely that all three nuclear stations in Ontario will be refurbished, and there is a strong possibility that Pickering will close. In Europe, even in France the future of the currently operating units is now in question. It is likely that there will be a gradual reduction in the nuclear share of electricity in France towards 50% and so older units (beyond Fessenheim) will likely close by 2030. New-build in the United Kingdom will only compensate for units shutting down, while further new units will only happen in a few countries such as Finland and (possibly) the Czech Republic. So with countries like Belgium and Switzerland following Germany into a nuclear phase-out, the overall European situation is one of gentle decline.
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