Commodities | Feb 23 2016
By Greg Peel
South Australia’s Nuclear Fuel Cycle Royal Commission issued tentative findings last week, suggesting the high cost of nuclear power plant construction, flat demand for grid-based power and the increasing use of renewable power sources mean nuclear is uneconomical for the state “for the foreseeable future”.
It is somewhat ironic that South Australia hosts three of the only four operating uranium mines, by federal government sanction, in the country, including BHP Billiton’s Olympic Dam – the largest known uranium deposit and the second largest operating mine in the world. The NFCRC suggests uranium mining in the state could be expanded further, nevertheless, and that the storage of spent nuclear fuel from abroad could provide a substantial economic benefit.
It is all well and good that the Commission should support further expansion of uranium mining in the state. Australia’s fifth once-operating mine – Honeymoon, also in South Australia — has been put on care & maintenance, while BHP’s expansion plans for Olympic Dam have been suspended for now and the company’s workforce at the site substantially reduced, with more reductions expected to follow.
While Japan continues its slow process of restarting existing reactors, China presses on with accelerated reactor construction and both China and Russia engage in reactor construction for foreign clients (India being perhaps the most notable), elsewhere activity is not so buoyant. The South Australian Commission cited high costs and low demand in advising against reactor construction, and the same conclusion has been arrived at by the Tennessee Valley Authority in the US.
The TVA has abandoned plans to build the first new generation reactors in Alabama, due to the high cost of construction and shrinking power demand.
Meanwhile, low electricity prices have driven the decision to switch off Sweden’s oldest reactor in 2017.
Perhaps this balance of nuclear power demand across the globe is best evidenced in activity in the global spot uranium last week. There wasn’t any. Sellers tried to spark some interest by lowering offer prices, industry consultant TradeTech reports, but didn’t get a bite. TradeTech’s weekly spot price indicator has been lowered by US50c to US$33.50/lb.
One small transaction was completed in the mid-term market last week. TradeTech notes the two big outstanding term market tenders, totalling almost 20mlbs of U3O8 equivalent for delivery over mid to long term periods, have yet to be settled. This likely explains why the market has ground to a halt. Pricing on these orders will no doubt set the tone for spot and term market trading ahead.
In the interim, TradeTech’s term price indicators remain unchanged at US$36.50/lb (mid) and US$44.00/lb (long).
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