How Geopolitics are Impacting the Nuclear Fuel Sector

Energy security a potential catalyst for nuclear industry growth

As uncertainty and green initiatives push nuclear energy conversations to the forefront, other issues have also risen around the need to ensure a safe, steady and uninterrupted supply of energy.

“The focus has really been on energy security,” John Kotek, senior vice president of policy development and public affairs at the Nuclear Energy Institute (NEI), said via email.

“Following the Russian assault on Ukraine we have seen a significant uptick in global interest in new nuclear, with the inclusion of nuclear in the EU taxonomy as an important barometer,” he said.

Kotek went on to note that the intersection of security and carbon-free energy offers an opportunity to the nuclear sector.

“As countries strive to achieve energy independence, many are turning to reliable, carbon-free nuclear energy,” he said. “This interest in carbon-free technologies offers a tremendous global export opportunity for new nuclear energy systems, as evidenced by the growing number of countries including nuclear energy in their long-term climate strategies.”

Growth through energy independence

However, like the oil and gas space, the uranium sector also has close ties to Russia. Ranking seventh in annual uranium output, the country produced 2,846 MT in 2020.

While Russia’s annual uranium mining represents a small fraction of the market, the country plays a large role in both the conversion and enrichment of nuclear fuel.

Conversion is an important upstream step in the fuel cycle where material is purified ahead of enrichment. In 2020 Russia, converted one third of global uranium.

In terms of enrichment, one of the final steps in the nuclear fuel production cycle, Russia possesses 43 percent of global enrichment capacity. International reliance on Russia’s role in the fuel cycle has been criticized in the past, and again is being highlighted by recent events.

“US nuclear energy innovators are well positioned to capture a sizeable share of this market, particularly as the Russian assault on Ukraine has highlighted the necessity of energy security and reliance on trustworthy energy partners,” Kotek said.

More mining capacity needed

In 2020, global mined output represented 74 percent of all demand according to the World Nuclear Association. The gap between supply and demand is likely to continue growing as new nuclear reactors come online and secondary supply is drawn down.

While new mines could take multiple decades to be built, new capacity could be brought on if existing mines are restarted. With spot prices now above the US$50 threshold, mine restarts are being planned.

Earlier this year, Cameco (TSX:CCO,NYSE:CCJ), a sector leader in production announced it would restart its McArthur River/Key Lake project, a property that once accounted for 13 percent of global mined supply and is considered the world’s largest high-grade uranium-producing mine.

The project was shuttered in 2017 after years of low uranium prices made the project economically unviable.

During a panel discussion at the World Nuclear Fuel Cycle conference in late April, Tim Gitzel, Cameco’s CEO, spoke about the challenges associated with restarting a mine, but was adamant that his company would have fresh pounds out of their Saskatchewan operations by year’s end.

“We have said 5 million pounds this year. We're hoping to get there. I think we're on track for that,” he told the attendees. “But it's not without risk. And the risks are the same ones I mentioned before. People, supply chain and inflation and we're seeing it.”

Cameco is also watching developments in the US, which could generate a significant demand for domestically produced uranium.

“Now you see the bills coming out to the US saying what happened to our production? How did we let it go down to zero when we consume 45 million pounds … and what should we do about that?” Gitzel said.

“So, we've got Wyoming and Nebraska facilities that under the right circumstances could come back on,” he added. “If (there is) a real drive for the US to have US production, then we'll look at those assets, and those could come back on again.”

The Cameco executive also cited the continued growth potential in Canada as well as promising projects in Australia as other ways to build capacity.

“It's all based on the politics and geopolitics,” he said.