Nuclear Fuel Market: Uranium Rallies on Invasion

The uranium spot market followed oil and gas prices higher this week after Russia advanced its invasion of Ukraine early on Feb. 24. But as US Democratic President Joe Biden has refrained from imposing direct sanctions on Russian energy exports, nuclear fuel market participants are not particularly concerned about a new source of supply disruption.

While uranium fundamentals are very different from those of oil and gas, the uranium spot price has over the past year become increasingly influenced by investors and financial firms that tend to make financial plays based on wider market dynamics — this week investor sentiment reflected fears of energy scarcity in Europe.

Sprott Asset Management's uranium fund saw its share price strengthen following this week's news, increasing its cash on hand to nearly $80 million for future uranium purchases. The average price assessment delivered by Energy Intelligence's Uranium Price Panel on Feb. 24 rose for the second consecutive week to $44 per pound U3O8 from $43.37/lb. on Feb. 17.

The only perceivable market effect of the invasion could be that some utilities decide they no longer want to do business with Russia due to geopolitical risk. Future sanctions on Russia's nuclear business could affect enrichment supply, but not necessarily U3O8. The world's largest uranium producer, Kazakhstan, experienced civil unrest at the beginning of the year, but even that did very little on its own to impact uranium prices. Though Russia played a major role in silencing the Kazakh unrest, it's too early to say what future role Russia might see for itself in Eastern Europe.

For now, the likelihood of sanctions restricting nuclear fuel deliveries from Russia — mostly in the form of separative work units (SWU) and enriched uranium product (EUP) — is small. That the US nuclear energy industry is today not threatened by sanctions on the Russian nuclear fuel trade owes much to prior turmoil. Under the Republican administration of Donald Trump, the industry received mixed messages about its relationship to Russian nuclear fuel suppliers — primarily Rosatom fuel fabricator Tvel's partnership with Global Nuclear Fuel (GNF) and Exelon to supply new lead test assemblies to the Braidwood reactor in Illinois.

Certain factions within Trump's State Department were keen on targeting Russia over its Bushehr newbuild project in Iran, and to those officials that meant targeting the whole of Russia's nuclear energy and fuel business. But the industry and US utilities stepped up lobbying efforts to illustrate to lawmakers and government officials the dearth of supply diversity in enrichment procurement and the lack of a US-origin supplier.

Today, Russia meets about 20% of US enrichment demand under the decades-old Russian Suspension Agreement, which was renegotiated in late 2020 to be reduced to near 17% of US demand after 2027 and extended to 2040. One area of concern is supply of the high-assay low-enriched uranium (Haleu) fuel to demonstrate two US advanced reactor technologies by 2028 as mandated by Congress. However, without real commercial demand to incentivize European enrichers Orano and Urenco to produce Haleu, the only nation capable of producing Haleu within that timeframe is Russia.

Energy Intelligence understands that the Energy Department's Office of Nuclear Energy and quasi-independent National Nuclear Safety Administration are well aware of this reality and have recently briefed Biden's White House staff, the State Department and the Department of Commerce on the matter. That simple understanding that the US government cannot achieve its Congressional mandate without Russian nuclear fuel underscores the Biden administration's awareness of the importance of Russian nuclear fuel supply to not only the US reactor fleet but the government's own massive investment in deploying commercial-scale advanced reactors as part of wider climate goals.

In the same way Europe is still heavily reliant on Russia for gas supply, severing nuclear fuel supply from Russia to the US would present major challenges to the US nuclear fleet and the DOE's advanced reactor program.