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| Uranium | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Lampard |
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| Following a doubling of the uranium spot price in 2007, the spot price in the first eight months of 2008 declined by 36 per cent year on year to average US$68 a pound. Prices peaked at US$136 a pound in June 2007, as a result of strong demand and concerns about future supply. The price decline over the past 12 months reflects increased availability in the spot market as production outpaces consumption. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Uranium spot price to fall further in 2008 and 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2008, the spot price is forecast to decline by around 30 per cent to average US$68 a pound. World uranium consumption is forecast to fall with the decommissioning of some reactors, while world mine production is expected to increase. In 2009, the uranium spot price is forecast to decline by a further 11 per cent to average around US$60 a pound, reflecting a significant increase in world supply. Large scale uranium producers sell most of their production through long-term contracts rather than on the spot market. The indicative long-term contract price, quoted by Ux Consulting, has not been as volatile as the spot price, although it has increased substantially over the past few years. In 2008, long-term contract prices have so far averaged US$88 a pound. However, long-term contract prices vary between companies because of differences in contract lengths, volumes and market conditions at the time of signing. In Australia, for example, the average long-term contract price is significantly lower than the world indicator contract price. |
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| Secondary supplies to decline slightly | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Since the early 1990s, a proportion of world uranium demand has been met by secondary supplies of uranium, particularly from the Russian Federation. Secondary supplies have been sourced predominantly from the conversion of highly enriched uranium from dismantled nuclear weapons, government inventories and reprocessing. The supply of uranium from secondary sources is expected to remain steady in 2008 and 2009. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Uranium spot price to fall further in 2008 and 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2008, the spot price is forecast to decline by around 30 per cent to average US$68 a pound. World uranium consumption is forecast to fall with the decommissioning of some reactors, while world mine production is expected to increase. In 2009, the uranium spot price is forecast to decline by a further 11 per cent to average around US$60 a pound, reflecting a significant increase in world supply. Large scale uranium producers sell most of their production through long-term contracts rather than on the spot market. The indicative long-term contract price, quoted by Ux Consulting, has not been as volatile as the spot price, although it has increased substantially over the past few years. In 2008, long-term contract prices have so far averaged US$88 a pound. However, long-term contract prices vary between companies because of differences in contract lengths, volumes and market conditions at the time of signing. In Australia, for example, the average long-term contract price is significantly lower than the world indicator contract price. |
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| Demand for U3O8 to decline slightly in 2008… | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Uranium is primarily used as a fuel in nuclear reactors. As of September 2008, there were 439 nuclear reactors worldwide, with a total operating capacity of more than 373 000 megawatts electric (MWe). In the last quarter of 2008, two nuclear reactors are scheduled to start operation while three nuclear reactors are expected to shutdown. In India, Unit 4 of the Kaiga reactor and Unit 5 of the Rawatbhata reactor are scheduled to commence operation in late 2008. The reactors each have a capacity of 202 MWe. Also supporting demand for uranium will be power uprates to reactors in the United States, Sweden and France which could add around 1000 MWe to existing capacity in 2008. Power uprates allow the maximum power at which a nuclear reactor operates to be increased through the use of more highly enriched uranium fuel. On the other hand, nuclear power plants in Slovakia and the United Kingdom are expected to be decommissioned as they approach the end of their operating lives. Operations at Unit 2 of the Bohunice V1 nuclear power plant (408 MWe) in Slovakia will cease at the end of 2008. The shutdown of the reactor reflects commitments Slovakia made to the European Union to shut the power station on safety grounds. The Oldbury reactors (434 MWe) in the United Kingdom are also expected to close in 2008 reflecting the ageing nature of the reactor design. In the first half of 2008, Japan’s nuclear power industry operated at a utilisation rate of around 40 per cent compared with a target rate of 70 per cent. This resulted in a fall in Japan’s uranium consumption in the first half of 2008 relative to the corresponding period in 2007. Reflecting these developments, world uranium consumption is forecast to decline by around 1 per cent to 76 800 tonnes of U3O8 in 2008. |
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| …but increasing in 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| World consumption of uranium is forecast to increase by 3 per cent to 79 400 tonnes of U3O8 in 2009. Five new nuclear reactors in India, Japan, the Russian Federation and Chinese Taipei are expected to underpin growth in uranium demand. In addition to the reactors scheduled for completion in 2009, the restart of Unit 2 of the Bruce reactor in Canada is also expected to be completed. This unit was closed in 1995 following a maintenance accident. These reactors, combined with power uprates in the United States and Mexico, will contribute nearly 3000 tonnes of additional U3O8 consumption in 2009. Partly offsetting this additional consumption, the second unit of the Ignalia nuclear reactor in Lithuania is scheduled to be decommissioned in 2009. The reactor has a capacity of 1185 MWe and its closure was a condition of Lithuania’s entry into the European Union. |
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| Strong global mine production in 2008… | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2008, global uranium mine production is forecast to increase by 6 per cent to 51 500 tonnes of U3O8. The strong growth is a result of significant production increases in Kazakhstan, Namibia and South Africa. Uranium production in Kazakhstan is forecast to increase by 9 per cent to around 8500 tonnes of U3O8 as mines which commenced operating in 2007 and the first half of 2008 increase production. These include Uranium One’s Kharasan One (2000 tonnes of U3O8 year) and Kazatomprom’s Semisbai mine (2300 tonnes of U3O8 year). In South Africa, uranium production is forecast to increase by 50 per cent to around 950 tonnes of U3O8 as production at Uranium One’s Dominion project approaches capacity and AngloGold Ashanti’s Vaal project increases its recovery of ore. Production increases at Paladin Energy’s Langer Heinrich project and Rio Tinto’s Rossing project will increase Namibia’s production by 35 per cent to around 4600 tonnes of U3O8 in 2008. |
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| …and 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2009, world uranium production is forecast to increase by a further 15 per cent to around 59 300 tonnes of U3O8 supported by increased production in Kazakhstan, Africa and Australia. Kazakhstan’s production is forecast to increase by around 35 per cent to 11 600 tonnes of U3O8 as nine mines commissioned in the previous two years increase production to full capacity and Kazatomprom’s Kharasan Two mine commences production. In Africa, production is forecast to increase by 20 per cent to more than 11 500 tonnes of U3O8 because of higher production in Malawi, Namibia and South Africa. New mines expected to commence production include Paladin Energy’s Kayelekera project in Malawi (1500 tonnes of U3O8 a year), UraMin’s Trekkopje project in Namibia (1360 tonnes of U3O8 a year) and First Uranium’s Buffelsfontein project in South Africa (725 tonnes of U3O8 a year). In addition, South African and Namibian mines which commenced operating in 2008 are expected to contribute to growth in mine production. |
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| Australian production increasing although export earnings to fall | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2007-08, Australia’s uranium production increased by around 6 per cent to 10 151 tonnes of U3O8 as a result of higher production at BHP Billiton’s Olympic Dam mine in South Australia and Energy Resources Australia’s (ERA) Ranger mine in the Northern Territory. This figure is lower than previously forecast reflecting the decision of Uranium One to halt construction work at its Honeymoon mine in South Australia. The mine had been scheduled to start production in mid-2008 with a capacity of 400 tonnes of U3O8 a year. However, production has been delayed as the company seeks a partner with capital to assist with the completion of the mine. Australian mine production in 2008-09 is forecast to increase by 2 per cent to around 10 380 tonnes of U3O8. The majority of the production increase is expected to stem from ERA’s Ranger mine in the Northern Territory. ERA is targeting higher grade ore at the bottom of the Ranger pit and this is expected to enable increased production. Access to the bottom of the pit was restricted in 2007 following heavy rainfall. The Ranger laterite plant is also scheduled to commence operation in the third quarter of 2008, enabling the mine to produce an additional 400 tonnes of U3O8 a year through the processing of stockpiled laterite ore (ore with high clay content). In 2007-08, the value of Australian uranium exports increased by 35 per cent to $887 million reflecting increased export volumes and higher assumed contract prices. Following two years of export earnings growth in excess of 20 per cent, the value of Australian uranium exports in 2008-09 is forecast to decline by 8 per cent to $820 million. Despite increased export volumes, the decline in Australia’s export value reflects expected lower prices received by the Beverley mine in South Australia, as all of its sales are made on the spot market. |
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