The enriched uranium market is all at sea | USAEMALL.com

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The Atlantic Action II is stuck in limbo far from the ocean after which it was named. 

Five days after Russia imposed tit-for-tat restrictions on exports of enriched uranium to the US, the 14-year old vessel remains anchored outside the port of Saint Petersburg, its crew presumably unsure whether the radioactive cargo they were due to collect for a US-based client can still be shipped. 

Moscow’s new measures, announced on Friday, come with caveats. Just as US import restrictions introduced in May still allow companies to seek waivers allowing uranium shipments when they can’t obtain supplies elsewhere, so the Russians “didn’t say they’re outright ending all deliveries to the US,” says Jonathan Hinze, president of UxC, a consultancy specialising in the nuclear industry. 

Russia’s cash requirements and control of almost half of global enrichment capacity, coupled with the energy needs of the world’s biggest economy, mean “the US stands out conspicuously as the largest importer of Russian material, both prior to Moscow’s invasion of Ukraine and since,” writes Darya Dolzikova, a research fellow at Royal United Services Institute.

(Dolzikova also notes that the value and volume of French imports of enriched uranium from Russia rose notably in 2022 and remained elevated in 2023.)

Yet 30 years after the “Megatons for Megawatts” nuclear disarmament programme kicked off the transfer and conversion of hundreds of tonnes of Russian weapons-grade uranium to the US (and days before Ukraine launched US-manufactured missiles into Russia), Moscow’s counter-ban marks “another nail in the coffin” for relations between the two superpowers, Hinze adds.

Prices in the thinly traded uranium spot market (~85 per cent of enriched uranium is purchased on contract terms) rose about 5 per cent to $81/lb in the week to Tuesday, according to UxC data.

Prices had climbed to a high of $106/lb in January in anticipation of the limits the US introduced four months later, but have slipped since as the market realised Russian exports wouldn’t be entirely cut off. A hefty cut to its 2025 production guidance by Kazatomprom, the world’s largest uranium miner, did little to arrest the slide.

Years’ worth of enriched uranium inventories held by US utilities explain the past week’s relatively muted price action, according to analysts. “Flow from stockpiles is a feature of this market; no other commodity trade’s total supply is so dependent on its inventories,” says Tom Price at Panmure Liberum. 

But these stockpiles “already feed replacement fuel assemblies,” Price adds, meaning the US is likely to raise imports from Europe’s enrichers, lifting costs worldwide until enriched uranium trade flows readjust around Russia’s ban. If it took gas and coal prices between six and nine months to adjust to Russia’s 2022 export bans, expect uranium’s much smaller market to take a little less.

Big Tech’s newfound interest in nuclear energy as a power source for AI data centres complicates matters further. Potentially much higher demand is coming but has yet to be priced in. Supply is constrained. “If this AI, micro-reactor stuff really takes off, the fuel markets are not ready to handle that new demand,” says Hinze.

Excluding France and China, “most other parts of the world are not really increasing their inventory levels, which we find a head-scratcher,” says John Ciampaglia, chief executive of Sprott Asset Management, whose $5.4bn total NAV physical uranium trust holds 66mn pounds of the stuff — equivalent to 16 months of total US requirements.

“Our theory [on why US utilities aren’t ramping up inventories as fast as some think they should be] is that they seem to think prices will fall,” Ciampaglia told us:

We beg to differ. Our thesis is very simple: the industry has a structural supply deficit which is only going to get worse as mines become closer to end of life. The only way to solve that gap is through higher incentive pricing, to raise the incentive to build new mines.

The decision by the US to slowly cut out its biggest supplier will naturally alter the global flow of enriched uranium “in a big way in the years ahead,” says Hinze.

Dolzikova notes, with a qualification, that US efforts to wean itself off Russian nuclear fuel supply may prove ineffective, however:

An increase in the value of Russian enriched uranium imports by China since 2022 has been accompanied by an increase in the value of Chinese exports of enriched uranium in 2022 and 2023, driven primarily by deliveries to the US. However, publicly available data reviewed for this report is insufficient to conclude definitively whether displacement is actually occurring.

None of which is likely to soothe the crew of the idle Atlantic Action II, who are probably freezing their cockles waiting for clarity on their next port of call.

Further reading:
— Hot uranium threatens a meltdown for Western energy security (FTAV)