New facilities are on the horizon

6 October 2014



With a number of major contract changes and facility shut-downs, the conversion industry is in transition. By Eileen Supko and Thomas Meade


In March 2014 Cameco Corporation announced that it was terminating its toll conversion services agreement with Springfields Fuels Ltd (SFL) effective in December 2014, two years early. Production at the facility ceased in August 2014. Closure of natural uranium hexafluoride (UF6) production facilities at Rosatom subsidiary, Joint Stock Company (JSC) TVEL's (TVEL) Angarsk Electrolysis Chemical Combine (AECC) occurred at the end of the first quarter of 2014.

New UF6 production facilities are on the horizon with facilities beginning commissioning in France and firmly planned in Russia. AREVA is in the process of replacing its existing uranium conversion capacity with new uranium conversion facilities at Malvési and Pierrelatte, the Comurhex II project. AREVA reports that the older Comurhex I is scheduled to be shutdown in 2015, with supply needs to be met through inventories until full commissioning of Comurhex II facilities at Pierrelatte are completed in 2016. According to AREVA, commissioning of the new facility at Malvési took place in the second quarter of this year. TVEL plans to modernize and consolidate its conversion production capability with construction of a new conversion production center at the Siberian Chemical Combine (SCC). According to recent reports from SCC, construction of the new facility is expected to begin in 2015 with commissioning of the first stage in 2018 and commissioning of the second stage of the facility by the end of 2020.


Picture: Pierrelatte Comurhex II construction site. Photo: AREVA/Dominique Gleize


Over the past year, there have been further developments in cooperation between Cameco and Kazatomprom regarding transfer of technology for conversion of uranium. In November 2013, a peaceful nuclear cooperation agreement was signed between the governments of the Republic of Kazakhstan and Canada. This agreement will allow transfer of uranium conversion technology from Canada to Kazakhstan. According to reports, a formal feasibility study for development of a conversion facility in Kazakhstan will begin in 2014. If the results of the feasibility study are positive, the start of construction of a conversion plant to convert uranium concentrates to UO3 at the Ulbinsky metal works could begin in 2018. UF6 transport experienced a brief halt earlier
this year from converters to enrichment facilities within Europe and between North America and Europe after a December 2013 discovery, at a European fuel cycle facility, of a detached lifting lug on a 48Y cylinder used to transport natural UF6. Following an industry-proposed inspection program for 48Y cylinders that includes visual inspection of the lifting lugs prior to transport, transport of natural UF6 restarted in July 2014.

Market

The conversion services spot market indicators have been characterized by rapid increases and severe declines in price over the past decade. Separate market price indicators are reported for the North American and European markets. While the North American market is discussed in detail here, the European market price typically contains a modest premium when compared
to the North American price. (European converters are able to charge higher prices for delivery of UF6 to European enrichment plants, since natural uranium feed deliveries from North American converters require additional transportation costs.)

The North American long-term market price has historically been much less volatile than the spot market price indicator and, in fact, the term price indicator published by TradeTech in its publications Nuclear Market Review and The Nuclear Review remained unchanged at $16.75 per kgU for nearly two years before declining to $16.00 per kgU on July 31, 2013, where it has remained for the past year. Over the past year the difference between the spot and long-term indicators has increased from $6.75 per kgU to $8.75 per kgU - a 30% increase in the gap. The lower quantities of UF6 transacted on the spot market continue to allow for sudden spot price changes, and this behavior is expected to continue in the future.

Requirements

Natural uranium in the form of UF6 serves as feed material for the uranium enrichment process to produce enriched uranium product (EUP) - also referred to as low enriched uranium (LEU) - used to fuel light water reactors (LWRs) that power the majority of commercial nuclear power plants throughout the world.

World requirements under the ERI reference nuclear power growth forecast for UF6 conversion services are projected to increase by 53% between 2013 and 2035, from 58 million kgU in 2013 to 89 million kgU as UF6 by 2035. World requirements for uranium conversion in other forms, primarily for use in pressurized heavy water reactors (PHWRs), add another 1.8 to 3.2 million kgU but do not require conversion to UF6.

U.S. annual requirements are projected to remain in a narrow range between 16 and 21 million kgU through 2035 for the reference forecast. The decrease in requirements in Western European could be as much as 23% over the period 2013 to 2035. However, requirements for UF6 conversion services in the Commonwealth of Independent States and Eastern Europe, East Asia and other regions are expected to grow by 36.1 million kgU between 2013 and 2035, a 166% increase. This is consistent with nuclear power growth expected in China, Russia, India, Korea and other countries through 2035.

Primary producers

There are four primary commercial suppliers of uranium conversion services worldwide: ConverDyn of the USA (26% of 2014 primary sustainable UF6 production capacity), Cameco of Canada (28% of 2014 capacity), AREVA/Comurhex of France (24% of 2014 capacity), and Rosatom/TVEL of Russia (17% of 2014 capacity). CNNC of China is also discussed due to the substantial role that it is expected to play in the future. Small producers such as Brazil, Argentina, Iran, Japan and Pakistan account for less than 1% of total capacity from the primary production centers. The annual sustainable capacity is assumed to be 90% of nameplate capacity for production facilities. The actual production at each facility will be dependent upon market conditions and contract commitments, as well as planned and unplanned facility maintenance. Some conversion facilities, such as Comurhex, have historically operated near the facilities' nameplate capacity, while other facilities have operated at 70% to 80% (or lower) of nameplate capacity.

AREVA subsidiary Comurhex operates facilities at two sites that are involved in the conversion of uranium to UF6. The Comurhex Malvesi plant converts uranium into UF4 and uranium metal. The Comurhex Tricastin site in Pierrelatte, France produces UF6 from the UF4 produced at Malvesi. AREVA reports that Comurhex I is scheduled to shut down in 2015. Commissioning of Comurhex II facilities at Malvési took place in the second quarter of this year, with full operation expected at both Malvési and Pierrelatte in 2016. While the current target nameplate capacity for Comurhex II is 15 million kgU, AREVA has reported that an optimization study is currently in process for completion of the Comurhex II facility including the schedule for possible expansion of its capacity to 21 million kgU per year.

Cameco produces both UF6 for LWRs and UO2 for CANDU reactors (PHWRs). Like AREVA, Cameco utilizes the wet solvent extraction process with some modifications that allow for recovery of hydrofluoric acid in order to reduce the volume of residue generated in the UF6 conversion process. Cameco operates the Blind River uranium refining facility in western Ontario to produce UO3 from U3O8. The UO3 produced at Blind River is transported across Ontario to Cameco's UF6 conversion facility at Port Hope, Ontario. Cameco has a toll conversion contract with SFL in the UK for production of approximately 5 million kgU as UF6 per year that originally extended to 2016. Under the toll conversion agreement, Cameco shipped UO3 from Blind River to SFL for conversion to UF6. Current plans are for production of UF6 at the SFL facility to be halted by the end of August 2014. Cameco expects to receive a maximum of 3.7 million kgU as UF6 from SFL through December 2014.

In 2012, Cameco and Kazatomprom signed an agreement that included the possible construction and operation of a uranium refinery in Kazakhstan, using Cameco technology, with capacity to produce 6,000 tonnes of uranium (tU) as UO3 annually, with joint ownership between Cameco and Kazatomprom.

ConverDyn, established by affiliates of General Atomics and Honeywell in 1992, is responsible for all marketing and contracting on behalf of Honeywell's Metropolis conversion plant. While the Metropolis facility has a nameplate capacity of 15 million kgU as UF6, it has not operated at that production level in the past. Annual production levels have averaged less than 10 million kgU recently and at times significantly lower, due to plant shutdowns as well as market conditions.

In June 2014, ConverDyn sued the U.S. Department of Energy (DOE) in the U.S. District Court for the District of Columbia in an effort to halt DOE's transfers of uranium from the government's inventory to the commercial market. A schedule for resolution of this lawsuit has not yet been set by the Court.

In the past, Rosatom subsidiary TVEL produced UF4 and UF6 at three facilities: UF6 production occurred at facilities operated by the AECC and SCC, using UF4 feedstock received from JSC Chepetsk Mechanical Plant (CMP). UF6 production at AECC was halted at the end of the first quarter of 2014 in anticipation of consolidation of conversion capability at SCC. In the future, Russia is expected to continue to underfeed its enrichment facilities as well as reenrich enrichment tails, reducing the needed U3O8 to UF6 conversion capacity.

TVEL is in the process of modernizing its conversion production capability with the construction of a new conversion production center at SCC. Public hearings were held in May 2013. According to SCC, an environmental impact statement is expected to be completed in 2014, with facility construction targeted to begin in 2015. The first stage of the new facility, with a reported capacity of 16 million kgU per year is expected to be commissioned in 2018 and the second stage by the end of 2020 with a nameplate capacity of 20 million kgU per year.

Rosatom does not generally sell conversion services alone, but has for some years been exporting EUP containing equivalent conversion services to Western Europe, the U.S., and East Asia. Over the past three years, Rosatom and its various subsidiaries have worked to enable the import of natural uranium from outside of Russia and C.I.S. countries. The first import of material from one of Rio Tinto's mines in Australia took place in 2012.

China National Nuclear Corporation oversees all aspects of the Chinese government's military and civilian nuclear programs. The current reported capacity of CNNC's conversion plant at the Lanzhou Nuclear Fuel Complex is 3 million kgU as UF6 annual capacity. CNNC conversion capacity is dedicated to meeting domestic requirements, which already exceed current reported indigenous conversion capacity. While information is limited, CNNC is expected to start expanding its domestic conversion capacity beginning in 2014 or 2015, as domestic conversion requirements will begin to increase rapidly. The nuclear power industrial park that was in the early planning stage to be built by CNNC and China General Nuclear Power Corporation at Heshan in Guangdong province has been cancelled, reportedly due to public opposition.

Secondary sources of supply

There are large secondary sources of UF6- equivalent (UF6e) material currently available in the world. These secondary supplies were an estimated 26 million kgU per year in 2013. Following the conclusion of the U.S.-Russia HEU Agreement in 2013, these supplies are projected to fall to an average of 15.5 million kgU per year during the period 2014 through 2022; and then further decrease to an average of 10.6 million kgU per year through the year 2035 as shown in Figure 2. However, it should be recognized that there are significant uncertainties in these forecasts, since each requires that those in control of these secondary supplies continue to take actions needed to make this material available to the commercial markets. Secondary supply includes material from commercial inventories (which have been increasing over the past five years), government inventories, enricher underfeeding and tails recovery, and plutonium and uranium recycle. Secondary supply does not include the strategic uranium that is being held by owners and operators of nuclear power plants and the commercial suppliers of nuclear fuel materials and services.

Market outlook

Primary production met approximately 75% of 2013 requirements, and secondary supply, which includes the feed component of Russian HEU, enrichment tails upgrading, and government stockpile draw-down was more than adequate to meet the remainder of requirements. In fact total supply, both primary and secondary, exceeded 2013 requirements by 20%. It is projected that total primary and secondary supply, including announced facility expansions and an assumption that CNNC expands Chinese conversion capacity to meet internal requirements, will be able to meet Reference forecast requirements through 2035. This is more clearly illustrated in Figure 3, which presents the relationship between projected supply (assuming that facilities produce at 90% of nameplate capacity in the future) and requirements through 2035. Note that the supply shown in Figure 3 doe1s0.n0ot include the potential 6,000 MTU expansion of AREVA's Comurhex II plant, nor capacity from a possible conversion facility in Kazakhstan, but TVEL's SCC expansion is included.

"The existing market overhang of UF6 associated with large utility and supplier inventories will persist for several years."

As shown in Figure 3, the existing market overhang of UF6 associated with large utility and supplier inventories will persist for several years. The projected excess supply margin, which is projected to be an average of 12% in excess of requirements from 2015 to 2025, provides some flexibility for the market to absorb future disruptions in production capacity among any of the convertors. In addition, end-user strategic inventories, deferral of deliveries, and loans of material by producers have provided adequate protection against the supply disruptions experienced in the past. After 2025, supply margin is projected to be an average of 6% in excess of supply through 2035, indicating that modest additional supply may be necessary in addition to the assumed capacity growth in China.

Figure 3 assumes that CNNC expands conversion capacity commensurate with its expanding requirements for UF6, which results in supply exceeding requirements through 2035 as noted above. However, if CNNC conversion capacity does not keep pace with its expanding reactor requirements, worldwide demand could exceed supply during the period 2016 to 2021. Existing Western supply would not be sufficient to meet worldwide requirements after approximately 2021 if there are delays in CNNC's conversion capacity expansion. Expansion of Comurhex II could meet some of this supply gap, as could construction of a conversion facility in Kazakhstan. However, if additional new construction is required, the lead time for construction of a new plant is expected to be 3 to 5 years. An additional 2 to 3 years should be allowed for licensing and engineering for a new facility to be built in a Western country. ¦

About the authors

Eileen Supko (supko@energyresources.com), principal, and Thomas Meade (meade@energyresources.com), principal, Energy Resources International, Inc., 1015 18th Street, NW, Suite 650, Washington DC 20036, USA

Pierrelatte Comurhex II
Figure 2
Figure 3


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