The 2022 ERI Report addresses impacts to Western nuclear fuel markets following Russia’s invasion of Ukraine in February 2022 as many nuclear operators are looking to decrease their use of Russian nuclear fuel products and securing alternative supplies. It appears likely that limits on the use of Russian nuclear fuel products will take place in the U.S. and Europe, although considerable uncertainty exists. These limits could be both government-mandated and buyer-voluntary. The reductions could be total or partial and the implementation could be immediate or phased-in. The issues surrounding continued imports of Russian nuclear fuel are dynamic, complicated by transportation issues and the possibility that Russia will decide to cut off nuclear fuel supplies from the West. Regarding possible disruptions to Russian supply, ERI has focused on conversion and enrichment supply as these two nuclear fuel components are the most vulnerable. This report examines a range of possible supply shortfalls and possible increases in Western production capacity to address these shortfalls.
Status and Prospects for Nuclear Power
Worldwide nuclear power capacity decreased 0.2% (0.9 GWe) during 2021, and is expected to increase just 0.5% this year, as new additions in some countries are mostly offset by retirements in others. As of the end of 2021, world commercial nuclear power generation capacity stood at 387.1 gigawatt electric (GWe) net at 434 operating units in 33 countries, providing 10% of total world electric generation.
ERI has constructed three forecasts to characterize the potential use of nuclear power for the generation of electricity, representing Reference, Low and High Nuclear Power Growth Forecasts. These forecasts, which reflect the inherent uncertainties involved in long-term predictions of economic and political climates around the world, are current as of May 2022 and extend through the year 2045. The Reference Nuclear Power Growth forecast is consistent with a steady average annual nuclear generating capacity growth rate of 1.4% through the year 2045, which is a result of life extension and new construction.
The over-supply and low prices which characterized the uranium market for many years have now given way to a market environment which is incenting mine restarts and the development of early-mover new mines. Supply side-discipline over the last three plus years, achieved by placing numerous mines on standby and operating mines at less than nameplate capacity, halted and then started to reverse the buildup of excess inventories. Significant purchasing by uranium investments funds, led by the Sprott Physical Uranium Trust (SPUT), has served to accelerate the depletion of excess inventories. The main impact on the uranium market associated with Russia’s invasion of Ukraine may be lower secondary supply resulting from the expected reduction in enricher underfeeding.
World requirements increased 3% to 140 million pounds in 2021 and are projected to increase to 152 million pounds in 2022. Requirements then rise to 164 million pounds in 2025, and an average of 177 million pounds in 2026-2030, 198 million pounds in 2031-2035 and 216 million pounds in 2036-2045. The uranium industry remains highly concentrated with ten suppliers controlling 92% of world uranium production in 2021. The top three producers of uranium in 2021 were Kazatomprom, Orano and Uranium One, with a combined 45% of 2021 mine production. Cameco is traditionally one of the top three producers but its production was lower in 2020 and 2021 as a result of the reduced production at Cigar Lake.
Production from expansion of existing mines and restart of mines under care and maintenance is actively underway, but schedules will depend on market conditions. Steps to bring planned mines into production are also ongoing. Excess inventory that had been overhanging the uranium market is projected to be eliminated by the end of 2023. New production will be needed in the 2023 time frame, with the first new production expected to come from lower cost expansion/restart of existing mines followed by planned and prospective mines. Uranium market clearing prices are projected to rise to support production increases.
Conversion Services Market
During 2021, natural uranium hexafluoride (UF6) production increased compared to 2020 but a supply-demand imbalance remained. Secondary supplies, including supplier purchases of UF6, and supplier and end-user strategic inventory drawdown helped to fill the gap. Rising demand for UF6 through 2045 will result in projected supply deficits, even assuming no supply restrictions going forward. World requirements for UF6 conversion services under the Reference forecast were 51.6 million kgU as UF6 in 2021 and are projected rise to 61 million kgU pounds in 2025, 77 million kgU by 2035, and reach 82 million kgU by 2045.
Conversion services spot and term market indicators increased dramatically following Russia’s invasion of Ukraine in February 2022. ERI projects that conversion services market clearing prices will remain high in order to incentivize existing converters to increase UF6 production capacity in the near term. The 2022 ERI Report examines the impact of removing Russian supply from Western markets by 2026. Over the period 2022 to 2026, supply and demand are projected to be roughly in balance. Western conversion services fall short of Western requirements for UF6. With the redirection of Western enrichment capacity away from underfeeding to production of low-enriched uranium, assuming restrictions on the import of Russian fuel in the U.S., Europe and other countries, ERI projects an average supply deficit of -6 to -8 million kgU as UF6 per year over the period 2026 to 2035, -4 to -6 million kgU per year in 2036 to 2040, and -3 to -5 million kgU per year in 2041 to 2045. These deficits will climb higher if additional countries move away from Russian supply.
Enrichment Services Market
The Reference forecast projects that actual world enrichment services requirements were 43.2 million SWU in 2021 and will increase 5% to 47.6 million SWU in 2022. Requirements are expected to continue to steadily increase, reaching 74 million SWU per year in 2041-2045. The average annual growth rate is 2.0% per year over the entire forecast period. Enrichment supply remained static during 2021. Total enrichment capacity in 2021 was well in excess of requirements, with the excess supply used to underfeed and re-enrich tails material; however, this is expected to change assuming that there will be limits on Russian imports of low-enriched uranium to the West.
Russia’s invasion of Ukraine on February 24, 2022 has resulted in a dramatic increase in enrichment prices. The impact of any limits on Russian imports will be felt acutely in the enrichment sector, as Russia has 46% of the world’s nameplate enrichment capacity and supplied 28% and 31% of deliveries to the U.S. and the EU, respectively, in 2021. ERI’s reference supply adequacy scenario projects Rosatom’s world market share will decline to approximately 20% by 2026.
Enrichment market clearing prices are projected to rise due to the virtual elimination of available excess inventories and the near-term need for new enrichment capacity that has resulted from expected restrictions on Russian enrichment supply in response to the Ukraine invasion. The higher prices are needed to incentivize the addition of new capacity at existing Urenco and Orano centrifuge-enrichment sites.
Fuel Fabrication Market
Fabrication facilities in the U.S., Europe, Japan and Russia continue to be underutilized; however, new areas for growth include alliances with small modular reactor and advanced reactor designers for fuel fabrication. In Japan, the fuel fabrication facilities operated by Nuclear Fuel Industries and Mitsubishi Nuclear Fuel restarted in 2021 following safety reviews by Japan’s Nuclear Regulatory Authority. Russian fabricator, JSC TVEL’s ambition of growing its business in Western Europe and maintaining its strong-hold in Eastern Europe will likely not withstand the fallout from Russia’s invasion of Ukraine in February 2022, as Eastern European nuclear power operators move to Western fuel fabrication supply.
Accident tolerant fuel (ATF) development by fabricators continues with lead test rods (LTR) for ATF designs continuing to be introduced into reactors in the U.S. and Europe. ERI expects reload quantities of ATF fuel to be introduced into U.S. nuclear power plants in the mid-2020s. Fabricators are also introducing additive manufacturing, or 3D printing, to the manufacture of nuclear fuel. Nuclear fuel assembly hardware and handling equipment, which were built using 3D printing, have been installed in nuclear power plants in the U.S. and Europe.
Spent Fuel Storage and Disposal
Spent nuclear fuel (SNF) inventories in wet and dry storage continue to grow worldwide. While several European countries are progressing with plans for construction of repositories for SNF and high-level radioactive waste, repository programs in the U.S. and elsewhere have stalled. In the U.S., intervenors have filed lawsuits against U.S. NRC licensing actions associated with the two central interim storage facilities under development – Interim Storage Partners, which is a joint venture between Waste Control Specialists and Orano USA in Texas, and Holtec International, Inc. in New Mexico, and the lawsuits are ongoing in U.S. courts.
At year-end 2021, approximately 291,000 metric tons of heavy metal (MTHM) of SNF was in either wet or dry storage at nuclear power plant sites, AFR storage facilities, or storage facilities at reprocessing facilities worldwide. Under the Reference forecast, cumulative SNF discharged from nuclear power plants worldwide will grow from 291,000 MTHM in 2021 to approximately 528,000 MTHM by 2045 (accounting for SNF that may be reprocessed). Of these total projected discharges, ERI projects that more than 165,000 MTHM will be reprocessed through 2045.