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By Stephen Lee
The Trump administration’s hard look at uranium imports is already rattling nuclear utilities’ fuel-purchasing decisions.
The Commerce Department said July 18 it would launch an investigation, at the behest of uranium mining companies Energy Fuels Inc. and UR-Energy Inc., into whether U.S. overreliance on imported uranium threatens national security.
Although it is still too early to measure the Commerce probe’s specific impacts, John Keeley, a spokesman for the Nuclear Energy Institute, confirmed that some utilities “may be choosing to defer their contracting until there is more certainty with the outcome of the Department of Commerce’s review.”
To make nuclear fuel, uranium is extracted from rock and enriched, before being made into pellets that are loaded into assemblies of nuclear fuel rods.
The demand is there. Most utilities’ uranium needs are locked down for the next couple of years, but generally not beyond 2020 or 2021, said Treva Klingbiel, president of uranium analyst TradeTech LLC in Englewood, Colo.
If the Commerce Department delivers a quota mandating that 25 percent of U.S. uranium must be domestically produced, utilities might be barred from taking foreign shipments for which they’ve already contracted. In that case, they might have to argue that uncontrollable events have voided their purchase agreements.
Energy Fuels of Lakewood, Colo., and UR-Energy of Littleton, Colo., had earlier asked the Trump administration for a quota capping foreign uranium imports at 75 percent of U.S. needs.
The utilities would then have to turn to domestic uranium suppliers, but right now, there’s not enough domestic supply to satisfy the 50-million-pound national demand. Last year, U.S. producers accounted for only 1.1 million pounds. A 25 percent tariff would mean the sector would have to quickly ramp up roughly twelve-fold.
Uranium stockpiles of that size do sit underneath U.S. soil. The problem is that mining companies can’t afford to extract it at current prices of between $25 and $26 a pound, Paul Robinson, research director at the Southwest Research and Information Center in Albuquerque, N.M., told Bloomberg Environment. For them, the economics only make sense if uranium hits $40 to $60 a pound.
First Energy Corp. isn’t worried because its future uranium supplies are already contracted, but the company is also swiftly exiting the nuclear sector, said Tricia Ingraham, a company spokeswoman.
Nuclear utilities Exelon Corp. and Entergy Corp. declined to comment.
The Commerce Department’s action could also be a prelude to a tariff on foreign uranium. Klingbiel noted that tariffs seem to be a favored policy tool for the Trump administration.
That introduces yet another wild card into utilities’ decisions, according to Tim Gitzel, CEO of uranium giant Cameco Corp in Saskatoon, Saskatchewan, Canada.
“That’s probably not good for U.S. utilities,” Gitzel said during a July 26 earnings call. “It certainly has added to confusion in the market. We have to see a few new cards.”
The administration’s moves are also shaking up the supply side.
Gitzel said a 25 percent quota is “a bit aggressive” because of how much more uranium it would require the U.S. to produce.
Cameco, the biggest uranium producer in the world, has U.S. mines that could probably get up and running in 18 to 24 months, Gitzel said. But he also said that wouldn’t make economic sense unless the mineral hit $50 to $60 a pound.
Already, uranium prices are “unsustainably low,” Gitzel said. That’s why the company said July 25 it’s keeping its McArthur River mine and Key Lake mill, both in Saskatchewan, shut down indefinitely. The company previously said those facilities might reopen later this year.
“It doesn’t make economic sense” to keep the mine open, Gitzel said.
U.S. uranium production represents only 1.8 percent of the world’s total, and production fell 64 percent during the first quarter of 2018, according to the Energy Information Administration.
Right now, only three uranium mines are operating in the U.S.: one owned by Energy Fuels, one by UR-Energy, and a third by Peninsula Energy Ltd. of Australia.
A fourth mine, also owned by Energy Fuels, is being evaluated and should soon be ready to start operating, Paul Goranson, Energy Fuels’ chief operating officer, told Bloomberg Environment.
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