Why Uranium Prices Can Rise

Start with the ultra-basic fact there is no such thing as an "open market" for uranium. Prices are reported by a select few nuclear-related organizations (like UXC) on the basis of what nuclear operator companies, power plant builders, uranium miners, and certain other players in the nuclear fuel value added chain decide to disclose as the prices they paid or received when they exchange contracts, weeks after the event. Trading uranium is mainly through playing mining shares.

What we know is that following the March 2011 Fukushima disaster prices crashed from a very high level of around $72.50 per pound (about $160 per kilogram) in February, and since that time have agonized at levels as low as $48/pound. They are rising again, slowly.

Nothing - in theory - says uranium prices should recover and fast, but they probably will and certainly can but the main drivers are surprising: debt throughout the industry, currency volatility, persistent undersupply, and even the anti-nuclear movement !

The Fukushima disaster, in part because it was so massive but also because it happened in a western, liberal-democratic country, was impossible to talk down and sweep under the rug. The carefully nurtured, false image of nuclear power - clean, safe and cheap - took what is very likely a mortal hit. The Fukushima disaster was arguably the first-, or second-worst calamity in the history of nuclear power. Following the 9.0 magnitude Tohoku-Pacific ocean earthquake and its ensuing tsunami, Tokyo Electric Power Company’s (TEPCO) Fukushima Daiichi plant suffered a complete station collapse, and partial core meltdowns, among other major malfunctions.

TEPCO is now bankrupt and its debts are now public debts - and are vast. Four of the six reactors at the site are now irreparably damaged, and the whole 6-reactor complex is expected to be completely abandoned, along with all or most of the fuel stored on-site. Decommissioning and Safestor or entombment, plus possible soil scraping over dozens of square kilometres, plus damages payments could or might total $5 trillion of costs, according to some estimates, through the next 20 years.


BUT THEN OIL PRICES ROSE
Things look very bad for uranium "market" players but above all, selling nuclear power needs high oil prices, to work. Japan is a long way from California and Cologne, New York and Newcastle, enabling heroic posturing by diehard defenders of the "clean, safe and cheap" nuclear mantra that atomic power beats Global Warming - - and High Oil Prices.

Risk exists that oil prices spike. It may only be through inflation going viral as the euro demoentizes and the European economy implodes into hyperinflation. It could be through Arab Spring going viral and tearing down the House of Saud. It might be through US economic growth coming back out of limbo, and it could be plain old market manipulation by you know who. In any case, high priced oil is the real propellant which launches the nuclear sales rocket.

They know it, we know it: pushing up oil prices is the last-best chance for nuclear power, and related vanity tech pipedreams and daydreams like electric cars, offshore windfarms. solar power plants, biogas plants, and a long list of other Feel Good themes for Big Government and Big Corporate players. The problem is simple: oil at even $90 a barrel is now so cheap that nobody panics.

In addition, the Fukushima disaster not only had indelible effects on Japan, but also on the nuclear power industry worldwide, and more importantly for it sequels, on global energy markets. While some of the ramifications are yet to be fully grasped, it is critical to begin the process of analyzing the likely impacts. These are almost all bad for nuclear power, and range right through the nuclear fuel value-add chain, from uranium mines to the dumps where not only low level, but high level cancerous radioactive wastes are carefully forgotten and left to rot.

It is not so difficult to put an oil price level for the barrel price needed to get the nuclear djinn back out of the bottle: this price level would be around $120 - $130 per barrel, which puts us exactly in the Nice Price zone announced by Goldman Sachs in a September 15 thinkpiece on oil prices. After that oil price level is attained, political deciders in the big oil oil consuming and importing countries will quickly panic and "rally back" to the so-called nuclear solution.

It doesnt matter that nuclear power saves almost no oil at all - nor do windfarms or solar plants. In any developed country, oil-fired electricity generation is an olde tyme curiosity from at least 25 years back in time. But like we know, that is far too sophisticated analysis for politicians or the voting public to understand. Lets be reasonable.


URANIUM SUPPLY: BAD NEWS
Saving nuclear power - along with big ticket, high priced green energy vanity tech - needs much higher oil prices. For the nuclear lobby the good news is higher oil prices could be coming, maybe fast.

Uranium prices are likely to rise in lockstep with oil prices, but likely not as high as the February price peak ($160 per kilogram). The reasons why prices will rise also include the deadly expensive hidden defects of nuclear power: the spent fuel cycle. A prime focus of anti-nuclear protestors in Germany, Japan and France the MOX route to fuel stretching, cutting high level wastes with fresh mined uranium, is under heavy attack. Power plant operators are unlikely to buy MOX fuels, and will have to buy more fresh mined uranium to cover.

Why the MOX route became big news - for the nuclear power industry - is also simple. Back in year 2000, uranium prices were as low as $10 per kilogram. But supply is always behind demand. Saving uranium is at least as obsessionally important for "saving nuclear power" as saving oil is critical for saving the late great consumer society and its vanity tech windfarms.

For an industry standard 900 MW reactor needing well over 100 tons a year of uranium, the fuel cost item can be waved aside with a regal flick of the hand by Great Minds, by the well paid Nuclear Boomers like James Lovelock and James Hansen - but not by real world nuclear power plant operators. Doing without recycled waste in the fuel stream has only one bottom line: higher uranium prices.

Recycling spent fuel, in its highest tech and most noxious form, as MOX (metal oxide fuel), is a delicate operation only attempted by the most foolhardy, irresponsible - and desperate nucleocrats, especially in France, but also Japan, USA, Russia and UK. To date and effectively, MOX has been abandoned by Japan (following Fukushima), the UK (simply because of its costs), Russia (because it has other and cheaper fuel sources), and MOX has only lip service support from the US. Neither China nor India are interested, either officially or otherwise in MOX.

Critical uncertainty on the engineering challenges and possible solutions for waste handling, such as spent fuel pools and dry cask storage systems are in large part why the EPR or European pressurizeddd reactor, a financial disaster for its only builder - Areva of France - was developed from the German Siemens 'Konvoi' reactor model: this featured high tech and ultra high cost design responses to the future need of using MOX - to save on uranium - because uranium prices can only rise. This is the real bottom line.


FURTHER OUT IT GETS REALLY BAD
The desperate rearguard fuel stretching action of mixing high level radioactive wastes with "fresh" uranium and calling it MOX is a losing bet. It is also near exclusively a French game, with very near-term and big cost implications which could help raise electricity prices by 50% in France in 5 years. The Parti Socialiste-Ecology party "coalition" or loose anti-Sarkozy alliance has already set a range of nuclear cutback goals, stretching from 15 to 24 reactors closed by 2025, and even more than that among some anti-nuclear hardliners, on a total reactor fleet of 58 reactors.

What is almost always missing from the posturing and preening in the media is simple: at least 12 of the 15 reactors to shut by 2025 must be retired because they will be outside their operating lifetime by then - despite "friendly life extensions" from the state. Only if they are shutdown earlier, say 2015-2020, is this a real cutback.

Since at least the start of the 1990s French nucleocrats have increasingly used MOX in regular reactor not originally designed for this fuel, unlike the vastly expensive EPR. To date, and depending on the truthfulness of data released by Areva and EDF, about 20 of France's 58 reactor use MOX. They are therefore even more contaminated with radiation than normal reactors. Their decommissioning will therefore be even more expensive than uncontaminated reactors. But they saved uranium !

How much does it cost to fully and safely retire a nuclear reactor ? We will find out in a large number of countries and soon. These include Germany, Switzerland, Belgium - and Japan. Other countries, especially the UK and USA, have taken a look at that future and pulled back in fear. The new trick idea is to "close and retire" nuclear reactors by simply cutting them back to zero net energy, as much power in as power out, and leave them to quietly rot on the horizon for the next 25 years. The UK has semi-official plans to do exactly that, to avoid the costs of real reactor shutdown, removal of all radioactive material, site decontamination and site recovery.

When these costs start to add up and weigh, world reactor fleets will enter a long-term profile of decline from which they will not escape. This will be the wipe out curve for the Nuclear Dream. But in the next 6 months, uranium prices have plenty of headroom. Go for it.