The desire for raw and energy independence, as well as the weak integration of the world’s economies, makes it necessary to find energy-consuming and environmentally friendly sources of energy. The global transition to a “green economy” draws attention to one of such possible energy resources – uranium.
According to the IAEA Annual Report 2016, there are 448 operational nuclear reactors with a total generating capacity of 391,116 MW, including at least 2 nuclear reactors that are planned to be closed, 61 nuclear reactors in 15 countries that are under construction. United States has the largest number of nuclear reactors – 99 units, France – 58 units, Japan – 42 units, China – 36 units, Russia – 35 units. According to the World Nuclear Association, the world volume of uranium ore produced in 2016 was 62,027 tonnes, of which about 40% of the world’s nuclear energy needs were provided by Kazakhstan (Figure 1). If considered in the context of meeting the world’s uranium demand, the indicator reached a record 98% in the last 10 years.
Figure 1. Top-5 largest uranium mine producers for the period 2007- 2016, tonnes
At the same time, disproportions in the supply-demand ratio for these commodities gave rise to a continuous negative decline in spot prices in the world uranium market (Fig.2). A similar dynamic is observed at the prices for Brent crude oil (Fig.3). The common unifying feature of these commodities is the global oversupply of raw materials and the falling price trend.
|Figure 2. Uranium price 2007-2017, US dollars||Figure 3. Oil Brent price 2007-2017, US dollars|
Even a reduction in the uranium production volume by one (as in the case of JSC NAC Kazatomprom, which announced this in early 2017) or several mining companies will not significantly affect the stabilization of market prices. The changing reaction in the global uranium market can follow after the settlement of tensions in trade and political relations between the US and China, which are the world’s largest energy consumers. Beside the fact that both countries are actively consuming and expanding the domestic resource base they also have a major impact on the world economy in general.
Uranium, like oil, is a “bargaining chip” on the world market, a source of energy and a reserve for possible military and political conflicts. In that respect, the growing interest of the Middle East and African countries in nuclear energy could further contribute to boosting uranium demand and market price. Furthermore, nuclear newcomer countries have established close collaboration with the IAEA and more experienced countries on the issues of research and education in nuclear physics and nuclear energy, as well as adoption of technologies and detailed information on activities related to peaceful use of nuclear energy.
For example, in Nigeria, rich in oil and uranium ore producing country, the development of nuclear power in many aspects has economically viable and promising opportunities. Firstly, uranium ore mining and use of a “peaceful atom” in extraction processes of oil implies less energy input than traditional, which make Nigeria a highly-attractive country for investment. Secondly, in a scenario of low oil price the sale of uranium ore to overseas countries (that have most nuclear power plants, such as the US and China) is able to ease financial downward pressure exerted by falling oil revenues. Thirdly, provision of cost-competitive and affordable nuclear electricity to the densely populated areas in Africa can be an important and stable funding source for the country.
Both resources as a whole have their own geopolitical and economic weight in the world and are still used as a fuel. Subsequently, volatility in oil and uranium prices may have a tandem effect with the only difference between the two – a time lag of commodities price.
According to medium-term forecast, growing number of nuclear power reactors under construction in China (up to 21 units), in India (up to 5 units) and in Russia (up to 7 units) should stabilize uranium prices. Despite the fact that EU plans to close or suspend activities of some nuclear reactors, therefore, shifting to wind and solar energy, the number of nuclear reactors is projected to increase from around 90 to 350 units with a total generating capacity of around 367-740 GW by 2030.
On the other hand, there is an another factor that can cause market uncertainty in the expectations of uranium price and rate of production mine – it is a widespread introduction of an improved and environmentally friendly technologies allowing to extract more power energy from spent nuclear fuel and radioactive wastes, whose reserves worldwide are hundreds of thousands of tonnes. On June 29, 2017 in Yekaterinburg at the International Conference on Fast Reactors and Related Fuel Cycles: Next Generation Nuclear Systems for Sustainable Development (FR17) held by IAEA, Russia was one of the few countries announced the introduction of this technology on one of its nuclear power plants.
JSC Rating Agency of the Regional Financial
Center of Almaty (Rating Agency of the RFCA)