23 | OCT | 2017 VOL 31 | NO 43 A WEEKLY PUBLICATION OF UXC.COM ® THE LEADING SOURCE FOR TIMELY MARKET INFORMATION Not If, But When? In the current downcycle, the spot uranium price has fallen 67% since March of 2011 and has lingered in a rather narrow Ux Price Indicators 75-cent trading range of $20-$20.75 over the last four months ® Weekly Ux U3O8 Price (10/23/17) $20.15 (-$0.20) since bottoming out at $18.00 last December. This recent Ux 3-Yr U3O8 Price $23.00 Ux 5-Yr U3O8 Price $27.50 lack of price volatility begs the questions of whether supply and demand in the current uranium market are perhaps closer Month-end (9/25/17) *Calculated values to equilibrium than many in the industry perceive and just Spot $20.25 NA Spot $4.60 when will the next price upcycle occur? Spot MAP* $20.45 NA Term $14.00 8 O The last several months have certainly brought a rash of 3 3-Yr Forward $22.75 EU Spot $4.60 U negative news to the demand side of the picture, namely a 5-Yr Forward $27.25 Conversion EU Term $14.00 shift in South Korea’s policy toward nuclear power following Long-Term $31.00 Spot $42.00 the election of President Moon Jae-in, a slight slowdown in NA Price $56.35 SWU Long-Term $48.00 the pace of new nuclear build in China, uncertainty surround- Spot NA Value* $57.51 NA Spot* $ 849 ing how quickly France will reduce nuclear power to 50% of 6 EUP UF EU Value* $57.51 NA Term* $1,270 total generation, the premature shutdown of a number of U.S. reactors unable to compete against inexpensive natural gas that production has not responded well to demand cuts, and subsidized renewable energy, as well as the cancellation mainly due to higher-priced legacy term contracts allowing of SCE&G’s Summer 2 & 3 in the wake of Westinghouse’s suppliers to continue operating profitably. If we look more bankruptcy. These significant demand-side events, and oth- closely at production costs of operating uranium projects from ers, prompted UxC to reduce its URM Q3 2017 Base Demand UxC’s 2017 Uranium Production Cost Study (UPCS), we find forecast by 4.5% over the period 2017 through 2030. We wit- that ~59% are producing at a full cost above the current spot nessed a similar move by the World Nuclear Association price. As legacy term contracts roll off, more of this produc- (WNA), as it dropped uranium requirements by 6.3% over the tion will become exposed to spot pricing, leading to additional period from 2017 through 2030 under the Reference Scenario cuts. in its recently published 2017 Nuclear Fuel Report. How- Global inventories also continue to be a major factor keep- ever, despite the forecasted demand declines, the spot price ing a lid on uranium prices, but these will not persist forever. has proven itself as somewhat resilient amid the bad news. Secondary supplies currently meet ~24% of UxC’s Base Case While the production cut announcement by Kazatomprom Demand for 2017, but this figure is projected to drop to ~17% in January did serve to help the spot uranium price recover in 2025. Next month, UxC is scheduled to release its updated from a low of $18, since then there were no significant addi- Global Nuclear Fuel Inventories report, which will provide an tional cutback announcements until two weeks ago when New updated review and analysis of the global nuclear fuel inven- AREVA reported that it would reduce production at its open- tory situation. pit SOMAIR mine in Niger by ~400 tU to 1,700 tU (~4.42 Like all commodities, the uranium market is cyclical and is million pounds U3O8) in 2018 from 2,100 tU (~5.5 million still in a period of adjustment, with the production side lag- pounds U3O8) in 2017. Furthermore, New AREVA is investi- ging. The previous downcycle (1979-2001) lasted over 20 gating the future course of production at its COMINAK un- years, but was characterized by unprecedented inventories derground mine in Niger, which UxC projects as higher-cost stemming from the U.S.-Russia HEU Agreement and USEC than its SOMAIR mine. Privatization. Additionally, it did not include the nuclear Kazakh ISR mines certainly host a lot of low-cost uranium, growth story in China, which is still quite positive today. We accounting for ~64 million pounds (~40%) of global produc- are now almost seven years into the current downcycle, and tion in 2016, but the fact of the matter is that very little of the while uranium prices could still push lower, the market is world’s remaining production is sustainable at a spot price of aiming to get tighter. It is ultimately not a matter of if ura- nium prices will rebound, but when? around $20 per pound U3O8. In past covers, we have iterated 23 | OCT | 2017 • 2 • VOL 31 | NO 43 News Briefs Industry Calendar • January 17, 2018 South Korea will allow construction of two re- NEI Fuel Supply Forum actors following panel’s decision Nuclear Energy Institute On Friday, a panel comprised of 471 ordinary citizens re- http://www.nei.org/Conferences The Mayflower Hotel, Washington, D.C., USA vealed its recommendation to allow construction to move for- ward on Units 5 and 6 at the Shin Kori nuclear power plant. • January 30-31, 2018 The panel spent three months reviewing information on Nuclear New Build Summit, Egypt 2018 InforValue Consulting whether to permanently cancel construction on the two 1,400- http://nuclearegypt.com/ megawatt APR-1400 reactors. Work on the reactors, which Cairo, Egypt are about 30% complete, was halted while the panel deliber- • February 14, 2018 ated. President Moon Jae-in, who previously made a cam- 6th Asian Nuclear Power Briefing 2018 paign promise to close Shin Kori 5 and 6, has stated that he Strategic Communications will support the decision and allow the reactors to be com- http://stratcoms.com/6thAsianBriefing18/ pleted. “We respect the will of the public-discussions com- Tokyo, Japan Details are available at: mittee that has deliberated on this for the past three months,” http://www.uxc.com/c/data-industry/uxc_calendar.aspx said a spokesman for President Moon as quoted by Bloom- berg. With construction now slated to resume, Shin Kori 5 is The impacted reactors include those at the Higashidori nu- expected to come online in 2021 with Unit 6 following in clear power plant, the Onagawa complex and the Hamaoka 2022. nuclear power plant. So far only two BWRs, Unit 6 and 7 at Although President Moon will allow the construction of the Kashiwazaki-Kariwa nuclear power plant, have been Shin Kori 5 and 6 to proceed, he has stated that a policy to cleared by the NRA as meeting the safety standards required phase-out nuclear power in South Korea will continue, which for restart, and Tokyo Electric Power Co. has already agreed includes a ban on the construction of additional reactors. to furnish those two units with emergency cooling systems. Also, the government will proceed with the permanent shut- Kansai EPC may scrap Ohi 1 & 2 down of Wolsong 1. “We will completely stop of plans for Multiple news sources reported last week that Kansai Elec- the construction of new reactors like the government previ- tric Power Co. (EPC), operator of the Ohi nuclear power plant ously stated,” said Moon in a statement that was quoted by in Fukui Prefecture, is pondering the option of scrapping Reuters. “The government will also step up usage of natural plans to restart Units 1 & 2 at the plant because of costly up- gas and renewables in order to maintain its stance of phasing grades needed to meet new post-Fukushima safety standards. out nuclear-generated power.” Japan Times reported October 17 that Kansai EPC will render Japan’s ruling party wins re-election in a land- a final decision on the fate of the reactors by the end of 2017. slide In 2019, Ohi 1 & 2 will reach their 40th year of operation. In a positive development for nuclear energy, the ruling co- Under new post-Fukushima safety standards, nuclear reactors alition in Japan led by the Liberal-Democratic Party won big in Japan are not allowed to operate for over 40 years unless in a national election yesterday, taking 312 out of 465 seats in significant equipment upgrades are completed to pass Nuclear the lower half of Parliament. With these results, Prime Minis- Regulation Authority (NRA) safety standards. An anony- ter Shinzo Abe will likely obtain a new term in office. In ad- mous source told the press that Kansai EPC would need to in- dition, the existing policies for restarting idled reactors are vest approximately $891 million to meet safety requirements likely to be maintained. In contrast, opposition parties had to operate Ohi 1 & 2 for another 20 years. Kansai EPC said it called for more restrictions on reactor restarts and an eventual was “studying from the technical and safety perspectives end to the use of nuclear power. The CEO of the Institute of preparations” to apply to the NRA for safety reviews of Ohi 1 Energy Economics, Japan (IEEJ), Masakazu Toyoda, believes & 2 to resume operations. the election results will allow for the restart of five additional Kansai EPC plans on putting Ohi Units 3 & 4 back online reactors over the next 15 months. during the first quarter of 2018 as they have passed prelimi- nary safety inspections and recently gained local consent for Japan’s NRA to require new emergency cooling restart.