Fuel review: enrichment

A busy year for SWU

1 September 2008

The SWU marketplace has seen a plethora of events that will impact the market for many years. By Ruthanne Neely, Cheryl Moss Herman and Jonathan Hinze

With many countries calling for either an expansion of their existing nuclear generating capacity or for entirely new nuclear capacity, the need for enrichment, now and into the future, to fuel the anticipated future fleet of reactors has never been greater.

The enrichment suppliers – the four majors as well as the smaller suppliers and the new entrant GE-Hitachi – were all engaged in intense activity over the last 12 months in efforts to move their respective SWU capacity expansion plans forward. The progress made by all of them was very noteworthy and provides assurances to wary utility operators that enough enrichment supplies should be available to fuel all of the existing and new reactors. US trade restrictions with Russia were relaxed with the ‘Suspension Agreement’ amendment and now we have a clearer vision of what Russian imports will be allowed into the USA after the end of the ‘HEU Agreement’ in 2013. But big questions remain as to whether ‘SWU only’ transactions are covered by the trade restrictions. SWU prices rose over the last 12 months and are likely to continue their upward trend for another 12 to 24 months at least until supply and demand comes more into balance, with tight supply being the near-term condition.


The four major enrichment suppliers, Areva, Urenco, Usec, and Tenex, are all in the midst of expanding or replacing existing enrichment capacity. Smaller enrichment suppliers, like Japan Nuclear Fuel Ltd and China Nuclear Energy Industry Company, are doing the same thing, but on a lesser scale. GE-Hitachi’s Global Laser Enrichment (GLE) is marching along to develop and commercialise a totally new technology that could dramatically alter the enrichment market. The new technology is laser-based and could potentially take enrichment tails assays down to much lower levels than with traditional technology, making the enrichment process much more efficient.


Areva is one of the two gaseous diffusion-based enrichment suppliers (Usec being the other one), and gaseous diffusion has proven to be a very expensive process due to the large amounts of electric power it consumes during the enrichment operation. Areva and Usec are both moving to replace their gaseous diffusion plants (GDPs) with new gas centrifuge capacity.

Areva currently is operating the Georges Besse GDP in France under a partnership structure known as Eurodif, with Areva having 60% of the shares. The capacity of the Eurodif GDP is approximately 10.0 million SWU per year. Areva is on a path to shutter the Eurodif GDP in the 2012-2014 timeframe and replace it with a gas centrifuge plant having a 7.5 million SWU capacity by 2016, with later expansion to 11.0 million SWU a possibility if market demand is sufficiently high. The new centrifuge plant, called Georges Besse II (GB II), located on the same site as the Eurodif GDP, will use gas centrifuge technology from the Enrichment Technology Company (ETC), itself a 50/50 joint venture between Areva and Urenco. Areva had been the 100% owner of GB II but, in late May 2008, it was reported that the Suez Group (now GDF Suez after the July 2008 merger between Gaz de France and Suez) reached an agreement to acquire a 5% stake in the new GB II plant. With this agreement, Suez will be able to secure a portion of its SWU supply needs for its seven Belgian reactors operated through its subsidiary Electrabel from the GB II facility.

The biggest accomplishment over the last year for the GB II project occurred in February 2008 (just 18 months after the ground was broken to start construction) when the Centrifuge Assembly Building (CAB) for the initial ‘South Plant’ was completed and handed over to ETC for centrifuge installation. Commercial startup of the first centrifuge cascade is expected in the first half of 2009. At the same time, construction has now begun on the ‘North Plant’. Estimated SWU capacities are 4.0 million SWU for the South Plant and 3.5 million SWU for the North Plant.

Areva’s US plant

Another major enrichment development occurred recently when, on 6 May 2008, Areva announced that it had selected a site in Bonneville County, Idaho near the Idaho National Laboratory in Idaho Falls for a planned US centrifuge enrichment plant. The observation that the USA will need significantly more SWU supplies following the end of the USA-Russia HEU (high enriched uranium) Agreement in 2013 was likely a strong factor in Areva’s decision to build a US centrifuge enrichment plant. The ending of the HEU Agreement (of which the 5.5 million SWU supply largely goes to the US market) presents a unique opportunity for new enrichment supply to be established in the USA.

Areva’s selection of Idaho came after the state of Idaho offered competitively favourable business conditions. Idaho considered the roughly $2 billion plant, with hundreds of potential jobs, an important investment in the state economy in a time of US economic downturn. Other factors important for the final site selection decision included land size and workforce availability. On 4 August 2008, Areva announced that the Idaho facility would be named the Eagle Rock Enrichment Facility (EREF).

Following site selection, Areva now plans to submit a construction and operating licence (COL) application to the US Nuclear Regulatory Commission (NRC) in the first quarter of 2009. The company would like the NRC to be able to complete the review in less than 30 months. The target timeframe estimate is based on the time it took Urenco to obtain a similar licence for its subsidiary Louisiana Energy Services’ National Enrichment Facility in New Mexico. Since Areva is using the same ETC centrifuge technology as Urenco, and the plant is almost identical to the GB II plant in France, the company hopes that the NRC will be able to process smoothly its licence application for the Idaho facility.

Construction on the new Areva Eagle Rock Enrichment Facility in Idaho is expected to begin in 2011, provided that all required regulatory approvals are obtained by that time. If so, Areva expects the first module of 500,000SWU per year to be operational by early 2014, with nominal capacity of 3.3-3.4 million SWU per year reached by 2019. Further expansion beyond the initial full capacity is possible as well.


Russia continued to make significant progress in 2007 and 2008 towards its ambitious goal of restructuring the Russian nuclear industry in order to have a more commercially oriented focus, including the separation of the defence sector from the civilian nuclear sector. Legislation approved in late 2007 established the Rosatom Corporation replacing the Federal Atomic Energy Agency. Rosatom will manage both the commercial sector of the Russian nuclear industry – that is Atomenergoprom (AEP), a vertically-integrated, commercial energy holding company with 100% stocks in federal property – and the defence sector, including defence nuclear facilities and R&D institutes. AEP includes Tenex (the enrichment and conversion exporter), Tvel (fuel fabricator and exporter of fabrication and finished fuel assemblies), Rosenergoatom (nuclear plant operator), Atom­redmetzoloto (uranium producer and exporter), Atomstroyexport (nuclear plant construction company), and other civilian nuclear organisations. The new corporation will also manage the nuclear materials strategic reserve and the back end. Sergei Kiriyenko, formerly head of the federal nuclear agency, was appointed the head of the new Rosatom Corporation. A key aspect of the government-approved nuclear industry restructuring effort is that it will allow some private ownership of civilian nuclear assets in the future. The structure of Rosatom and its civilian subsidiary AEP will likely continue to evolve as reporting structures and strategies are completed. However, the new structure is already paying off, as evidenced by a recent report by Tenex in July 2008 that its commercial uranium exports (excluding HEU sales) grew 30% in 2007 over 2006 to $1.58 billion. HEU sales in 2007 were $759 million.

Russia continued to make progress over the last 12 months in upgrading and increasing its SWU capacity under the Russian Centrifuge Project initiated at the end of 2005. Russia manufactures gas centrifuges at its Kovrov Mechanical Plant approximately 50 miles southeast of Moscow. Currently, Russia is in the process of replacing older generation, lower output centrifuges (Generation V and VI) at its four enrichment facilities with newer generation, higher output machines (Generation VIII). Russia is close to selecting the final design for a new, supercritical (higher speed and output) gas centrifuge machine called Generation IX that will go into production and be the future workhorse of the Russian SWU operations. Based on earlier reports, Russia is producing approximately 400,000 Gen VIII machines per year. It is estimated that Russia has a current total SWU capacity of around 23 to 24 million SWU and will grow this capacity to a net 27 million SWU by 2015, after replacements of older machines as well as installation of higher output new model machines are completed.

In February 2008, during a brief visit to the USA to sign the amendment to the Suspension Agreement, in a separate meeting with US electric utility representatives, Rosatom chief Sergei Kiriyenko first noted the idea of possibly building an enrichment plant in the USA using Russian centrifuges. The goal in considering such a facility is to bring the production closer to the consumer. Kiriyenko further noted that the project cannot be 100% Russian and must have US partners. Therefore, Russia has initiated talks with potential “American counterparts”. While this is an intriguing idea, to build such a facility would require overcoming many political and other obstacles. However, if it could be achieved, it would be a way for Russia to avoid US trade laws and would give US utilities another local source of SWU.


Urenco has continued the expansion of its European enrichment operations at a rapid rate over the last 12 months and will likely continue this expansion pace in the near term. Each of its three European sites has been busy. The Urenco Almelo site in the Netherlands recently received a new licence from the Dutch government to increase its SWU capacity to 4.5 million SWU per year. At its Capenhurst facility in the UK, Urenco announced that the first phase of new centrifuge cascades came online in the E23 building in November 2007 and was one of the fastest build outs ever for the company. The entire new E23 cascade at Capenhurst is expected to be online by the end of 2008. At its Gronau site in Germany, Urenco has stated that the first cascade of the larger TC-21 centrifuges has been successfully installed and will be capable of producing SWU later this year. Gronau is, so far, the only site where the higher productivity TC-21 centrifuges are being installed; all the other sites – including Areva’s GB II location – currently call for the use of the more mature but lower output TC-12 machine.

In addition to its rapid European centrifuge expansion, Urenco’s wholly-owned US subsidiary Louisiana Energy Services (LES) made significant progress towards the completion of its 3.2 million SWU per year National Enrichment Facility (NEF) in Eunice, New Mexico. In an NRC review meeting on 19 June 2008, LES officials reported that the first Separations Building Module (SBM 1001) was 80% complete. The SBM will house 24 TC-12 model cascades for a total of 1.6 million SWU per year capacity. The second SBM (SBM 1003) will be identical to SBM 1001, also with a 1.6 million SWU per year capacity. In the NRC review, NEF officials also noted that an additional two SBMs (SBM 1005 and SBM 1007), each also with approximately 1.6 million SWU per year capacity, were under consideration. LES said that first operation of the facility is still scheduled for the third quarter of 2009. Most of the initial 3.2 million SWU per year of NEF’s production has already been committed through very long-term contracts with utilities, some running through 2030.

In its 2 April 2008 financial report, Urenco reported that capital expenditures of €527 million ($825 million) in 2007 grew by 50% over the prior year. Urenco’s growth strategy of building additional SWU capacity that is covered by long-term customer contracts has resulted in a backlog of over €18.0 billion ($28 billion) at the end of 2007. By 2012, Urenco intends to increase its total production capacity (at all four sites) to about 15.0 million SWU per year, which is about 50% more than the company’s current capacity of 10.0 million SWU per year, and could potentially reach an 18.0 million SWU capacity if market demand is high. Urenco is positively situated to fund all of its projected centrifuge capacity growth with stable cash flows from existing operations and access to favourable financing facilities.


Usec, like Areva, is proceeding with plans to replace an ageing and expensive gaseous diffusion enrichment plant in Paducah, Kentucky, with a new gas centrifuge facility in Piketon, Ohio. Usec is using centrifuge technology developed by the US Department of Energy (DoE) in the 1980s, updated with new technological advances since that time.

The American Centrifuge Plant (ACP) is targeted for an initial capacity of 3.8 million SWU. In April 2007, Usec received a 30-year construction and operating licence from the NRC and began construction on the commercial ACP facility in May 2007. In September 2007, Usec announced that it had successfully begun the operation of ACP machines in a lead cascade configuration. Usec added to its group of key contractors for the ACP commercial plant in 2007 and 2008. Hexcel and ATK were brought onboard in August 2007 and Teledyne in March 2008, to join with Fluor, the existing engineering, procurement, and construction contractor. Usec also purchased a former Boeing manufacturing site in Oak Ridge, Tennessee in April 2008 to manufacture, test and balance centrifuge machines. In August 2008, Usec announced it had finalised the initial design for its AC100 centrifuge machine to be used in the commercial ACP. The AC100 is claimed to have an annual capacity of 350SWU per machine per year. Usec expects its manufacturing team to install a new cascade at Piketon, with 40-50 AC100 machines that will become operational at the end of the first quarter of 2009. Improvements to the current demonstration cascade will be introduced in stages this year.

In February 2008, Usec raised its cost estimate for the completed ACP facility from $2.3 billion to $3.5 billion, not including financing costs. The $3.5 billion ACP cost figure was confirmed in August 2008 following a detailed, bottom-up cost study. The increase in cost was due primarily to the run up in labour and commodities prices that are also affecting the targeted costs for new nuclear reactors. Usec successfully raised $775 million in a combined equity and debt offering in September 2007, which will be used to fund the ACP in 2008 and into 2009. Additional funds may be borrowed with the assistance of a newly established DoE government loan guarantee programme. Usec announced in August 2008 that it now expects that initial commercial operation of the ACP to begin in the first quarter of 2010 with the full complement of 11,500 machines (3.8 million SWU per year) deployed by the end of 2012. The company also disclosed that it has received offer acceptances from customers and is in the process of negotiating and signing long-term contracts for commitments totalling approximately $900 million for deliveries beginning in 2013.


In May 2006, then General Electric (now GE-Hitachi or GEH) acquired the rights to the Silex laser isotope separation process for uranium enrichment from an Australian company, Silex Systems. Since then, GEH, through its Global Laser Enrichment subsidiary (GLE) has created an entirely new enterprise dedicated to the development and commercialisation of the Silex enrichment technology at its Wilmington, North Carolina site.

On 13 May 2008, GEH announced that GLE had obtained approval from the NRC for a licence amendment to operate a test loop using the Silex laser enrichment technology at the existing Wilmington site. The test loop will enrich small amounts of UF6 and will then blend the material back down to natural UF6. Construction on the test loop is nearing completion, and it will be operated throughout 2008 and into 2009 to further assess the Silex technology.

GLE announced on 30 April 2008 that it had selected GEH’s Wilmington headquarters for a potential commercial laser enrichment facility. GLE noted in recent communications with the NRC in August 2008 that it expects to submit an application for a construction and operating licence for a commercial enrichment facility by the end of 2008. As with Areva and its new planned US enrichment facility, GEH has also asked the NRC for a shorter, 24-month review schedule. The GEH/GLE commercial facility would have an initial capacity of between 3.5 million and 6.0 million SWU per year and could begin production operations as soon as 2013/2014.

In the autumn of 2007, two US utilities, Exelon and Entergy, became the first utilities to sign non-binding letters of intent with GLE for enrichment services using the Silex laser enrichment technology. Under the agreements, the utilities could elect to provide support for the planned commercial scale GLE laser enrichment facility for the licensing and acceptance process.

On 20 June 2008, Canadian uranium company Cameco announced that it had entered into an agreement with GEH to acquire a 24% stake in GLE for $123.8 million. Going forward, GE will own 51% of GLE and Hitachi will possess the remaining 25% share. In addition, Cameco has also agreed to consider the potential joint-marketing of uranium and enrichment services.


In May 2008, Russia and China signed a $1.0 billion nuclear cooperation agreement that includes a new phase of a gas centrifuge plant in China, with Russia providing Generation VI centrifuges. China’s existing centrifuge enrichment capacity is about 1.0 million SWU per year, also using Russian-made centrifuges. The new enrichment facility will have a capacity of about 0.5 million SWU per year. China also signed an agreement with Russia whereby it will purchase 6.0 million SWU from Russia over a ten-year period. China has ambitious goals for building new nuclear reactors. Indigenous enrichment capacity will be in high demand to provide fuel for many of these new reactors.


Japan Nuclear Fuel Ltd’s (JNFL’s) enrichment facility in Rokkasho in northern Japan is undergoing a gradual transition from older gas centrifuge technology to a new centrifuge design. There are a total of seven lines of older centrifuge cascades at JNFL’s enrichment plant, with an estimated capacity of slightly more than 1.0 million SWU per year, but JNFL has had many problems with the older machine design. Five of the lines have been shutdown, and on 12 February 2008, JNFL decided to stop one more line, leaving only one line of approximately 150,000SWU per year remaining operational. JNFL hopes to keep this line operating until 2010; however, none of the other lines are expected to restart. To replace the older technology, JNFL developed a new centrifuge machine design and started up a lead cascade testing period for the new machines in November 2007. To date, the machines have tested well and so far they have had no technical difficulties. The new machines are said to be 4-5 times more efficient than the older machines. If the current testing continues to go as planned, JNFL will replace all of the older machines starting in 2010, with a plan to ramp up production at its Rokkasho plant to 1.5 million SWU per year over a period of approximately 10 years. JNFL supplies SWU only to Japanese nuclear utilities, and it is unlikely that they will engage in export sales even after the new centrifuge machines are installed and running.


On 19 May 2008, Alfredo Trajan Filho, president of Indústrias Nucleares Brasileiras (INB) stated that by 2012 the country would be able to cover domestic enrichment supply for its two operating nuclear reactors, Angra 1 and 2 (about 250,000SWU per year). In May 2006, the company initiated its first commercial uranium enrichment facility at Resende, about 40 miles north of Rio de Janeiro. It uses gas centrifuge enrichment technology developed by the Brazilian National Technical Institute of Nuclear Research and the Brazilian navy.

In the same month, the Brazilian Science and Technology Minister Sergio Rezende outlined an ambitious nuclear programme for Brazil that includes power plants and a nuclear submarine. The programme will also include enrichment as one of the components. According to BBC Monitoring, the government has earmarked 41 billion reals (~$24.7 billion) for the programme by 2010, not including labour costs.

In late February 2008, Argentina and Brazil announced that they had agreed to work towards creating a joint venture for uranium enrichment. The two nations intend to set up a commission to examine how they will cooperate in enrichment. Since both countries use different enrichment technologies, it’s not certain how a joint venture for enrichment will be implemented, but details are expected to be worked out over the coming year.

Trade restrictions

The enrichment market is fraught with multiple trade restrictions stemming from the efforts of the major enrichers, often along with their governments, using indigenous trade laws, to restrict what they see as unfairly traded SWU sales by competitors in their markets. Both the USA and the European Union (EU) have some form of trade restrictions against Russian SWU, and the USA has various levels of trade restrictions against SWU sales by the European enrichers. In Russia, all SWU supplies for Russian reactors are from Russian enrichment facilities and Russia also maintains a dominant share of SWU supplies to former Soviet Bloc countries (many of whom are now members of the EU). Over the last year, major changes occurred in the SWU trade regime that will impact SWU sales for many years to come.

Suspension Agreement amendment

US secretary of commerce Carlos Gutierrez and Rosatom chief Sergei Kiriyenko signed an amendment to the 1992 Agreement Suspending the Antidumping Investigation on Uranium from the Russian Federation (‘Suspension Agreement’) on 1 February 2008. Russia, unless under a special dispensation, has not sold commercial SWU to the USA since the Suspension Agreement went into effect in 1992, although Russian SWU supplies currently enter the US market under the 1993 USA-Russia HEU Agreement. This is a unique supply situation whereby Russia has agreed to downblend 500t of weapons grade HEU to commercial grade low enriched uranium (LEU). The resulting SWU component of the LEU (approximately 5.5 million SWU per year) is sold exclusively through Usec, and most of this is purchased from Usec by US utilities.

Overall, the amended agreement is intended to give Russia limited access to US commercial markets between now and 2020, and, in particular, to provide some continuity of Russian SWU supplies after the end of the USA-Russia HEU Agreement in 2013. The Suspension Agreement amendment allows Russia to begin entering into contracts for delivery of ‘uranium products’ under annual export limits that begin in 2011, ramp up in 2014, and run until 2020. The Table above provides the details for quantities of Russian LEU and its components allowed into the USA under the amendment. Significantly, these quotas allow for the importation of Russian LEU for US utility end use at the conclusion of the USA-Russia HEU Agreement in 2013, when supplies are projected to be needed. Under the terms of the amendment, the Suspension Agreement and its underlying antidumping investigation will be terminated at the end of 2020.

Although the amendment has entered into force, key details of its implementation remain unclear. A significant open question is how LEU produced in fulfilment of a SWU contract will be treated. (The ‘Domenici Amendment’, discussed below, would resolve this issue by including LEU imported under SWU only contracts in its restrictions on Russian LEU imports.) The Department of Commerce (DoC) plans to clarify implementation issues through the issuance of ‘Statements of Administrative Intent’, although the DoC has not discussed a timetable publicly for issuance of this important guidance to date.

Domenici Amendment

Senator Pete Domenici of New Mexico, an ardent supporter of nuclear energy, on 10 July 2008 successfully inserted his own ‘Domenici Amendment’ related to the Suspension Agreement amendment into the Senate version of the Energy and Water Development Appropriations bill for fiscal year 2009. While the provisions of the Domenici Amendment generally mirror the SWU quantity limitations of the Suspension Agreement amendment (with the exception that the small quantities start in 2008 instead of in 2011), it also provides an incentive for Russia to gain up to an additional 5% of the annual US SWU market in exchange for a commitment, under a USA-Russia bilateral agreement, whereby Russia would agree to downblend an additional 300t of HEU after the end of the HEU Agreement in 2013. The Domenici Amendment, if enacted into law, would supersede the Suspension Agreement amendment when there would be a conflict among the provisions. Importantly, it would be applicable to all Russian LEU imported, including that imported pursuant to a SWU only contract. Therefore, it would render moot the impact of the pending court decision in the Eurodif case on Russian imports by bringing all imports under the restrictions (see below).

The maximum level of imports under the Domenici Amendment would provide Russia access to about 25% of the annual US SWU market in the years following the end of the HEU Agreement in 2013. However, it is not certain if it will be enacted into law by the US Congress, and it is also not certain if the Russians will take advantage of the incentives provided. The Russians have stated that they do not intend to downblend any further quantities of HEU after the end of the HEU Agreement in 2013. We will have to wait a while before we know if the Domenici Amendment becomes US law and probably many years before we know if Russia will downblend additional HEU.

Eurodif trade cases

In December 2000, Usec petitioned the DoC and the US International Trade Commission (ITC) to initiate both antidumping and countervailing duty investigations against the import of LEU from France, Germany, the Netherlands, and the UK. The almost eight years of legal proceedings kicked off by the initial Usec petitions have been very complex and multifaceted. At the present time, an antidumping duty order exists on LEU from France while no antidumping or countervailing duty orders are currently outstanding against any of the other three countries nor is there a countervailing duty order against LEU from France. During the multi-year proceedings, the respondents contended that sales of SWU were a ‘service’ and not a ‘product’. This distinction would remove SWU from US antidumping law (as this law refers only to products, not services) and thus would render moot all of the Usec petitions. To date, the Court of Appeals for the Federal Circuit (CAFC) and the Court of International Trade (CIT) have agreed with the respondents, deciding that SWU is a service and not a product. The latest proceeding in these long and complicated court battles occurred in April 2008 when the US Supreme Court granted certiorari (ie decided that it would take the case) for a Usec/US government appeal of the March 2005 CAFC decision that SWU is a service. The appeal however rests on a more arcane legal issue. The Usec Supreme Court appeal cites a violation of the ‘Chevron’ doctrine, whereby the federal courts must give deference to a government agency’s interpretation of statutes it administers if the provisions of those statutes are ambiguous. Usec is saying that the DoC should be given deference in its interpretation of the US antidumping law as it applies to SWU. The case will undergo oral argument at the Supreme Court on or around 4 November 2008 but it may be sometime in the first half of 2009 before the Supreme Court makes a decision in the case.

Russian EU quota

Russia is continuing to negotiate the removal or relaxation of a quota requirement of around 20% of the EU’s SWU market for non-EU SWU coming into the EU, which was informally established in the 1994 unpublished ‘Declaration of Corfu’. The quota does not include re-enrichment of tails or the re-enrichment of European reprocessed uranium.

Since 1994, when the Declaration of Corfu was signed, 12 new members, mostly from Eastern Europe, have joined the EU, and many of these countries operate Russian-designed reactors that are 100% supplied with fuel from Russia, including all enrichment services. According to Rosatom head, Sergei Kiriyenko: “The Corfu Declaration restricts Russian nuclear fuel imports into Europe to 25%, while, in reality, they make up 35-40% as most of the Eastern European nuclear power plants, built with the support of the USSR and Russia, fully depend on Russian fuel.” Recently, the Russians opened discussions on the EU SWU quota with the European Commission (EC). The deputy director general of the EC’s Directorate-General for Energy and Transport (TREN) visited Moscow in April 2008 to discuss the future trade agreement on nuclear materials. While removal or reduction of the EU unpublished quota on Russian SWU is an important goal of Russia, it is not clear how soon the EU will actually take action to relax the quota.

On 8 April 2008, the Euratom Supply Agency published a communiqué based on the results of a 2007 EU utilities survey of enrichment requirements and contractual coverage of EU utilities for the period 2007-2015. It stated: “Those member states which are 100% dependent on one single enricher company, located inside or outside the EU, may face serious problems. Such a situation is not sustainable for the long term as the EU utilities need a balanced diversification supply policy.” The passage mainly targets the Eastern European states who are 100% covered by Tenex’s SWU. The communiqué also said: “The survey pointed out that the EU enrichers would be able to meet the demand but they will need to increase their capacities in order to satisfy the forecasted needs of EU utilities.” As such, we would expect that Areva and Urenco, who are expanding their European capacity, would strongly oppose providing Russia any additional SWU quota in the EU region.

SWU prices

The spot market price for SWU increased from $140 at the end of August 2007 to $156 at the end of July 2008, an 11% increase. While SWU prices have not been as volatile as natural uranium prices over the last year, they have been in a robust upward climb since 2006. The Figure shows the path of SWU prices from 1995 to 2008.

The brisk rise in the SWU price from 2006 has been caused by a number of factors. SWU supplies have been tight as the result of increased buying by utilities under long-term contracts to secure supplies and under lower tails assays that require more SWU over uranium. Another key element is the decreasing value of the US dollar (although it has stabilised recently) that has caused the price of a SWU in dollars to increase, as much of the worldwide supply of SWU is from non-US enrichers. Yet another factor is the rising cost of electric power needed to operate the gaseous diffusion plants. The GDP suppliers must recoup these higher power costs in higher SWU prices under new contracts being written with utility customers. The enrichment suppliers have been able to push some of the higher power costs onto the customer in the form of higher SWU prices in what has become a seller’s market.

UxC expects the price of SWU to continue on its upward path over the next 12-24 months at least, due to the current tightness in SWU supplies. The SWU price is likely to ease in the 2012/2013 timeframe as more SWU supply comes online from the centrifuge (and possibly laser) capacity expansions. The Suspension Agreement amendment, allowing commercial Russian SWU into the US market after 2013, also takes some uncertainty out of the mid-term supply picture and thus some pressure off of the SWU price. The enrichers are also making efforts to re-strict tails assay flexibilities in all future long-term SWU contracts, thus limiting the ability of utilities to replace high-priced uranium with SWU and thus taking some pressure off of SWU demand.

Actual future SWU prices will be determined by the strength of the nuclear renaissance and its corollary demand for fuel, the rate of SWU capacity expansion using centrifuge and laser technology, and what happens to exchange rates, none of which are known events at this time.

Author Info:

Ruthanne Neely and Cheryl Moss Herman, The Ux Consulting Company, 7272 Wisconsin Avenue, Suite 3 Bethesda, MD 20814, USA; Jonathan Hinze, The Ux Consulting Company, 1401 Boonsboro Place, Lynchburg, VA 24503, USA

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