Interview: Orano's Peythieu on Navigating Market in 'Fog of War'

The drive to replace Russian-supplied front-end nuclear fuel products in the wake of the Ukraine war has prompted speculation about possible enrichment and conversion capacity expansions in Europe and the US. France's Orano is a key producer in both spheres, and pre-war had already invested considerably in new facilities: the Georges Besse II (GBII) enrichment plant in Pierrelatte, France, and the Comurhex II conversion complex split between the Malvesi UF4 plant, in southwest France, and the Philippe Coste UF6 plant, also in Pierrelatte. At the recent World Nuclear Association general symposium Energy Intelligence's Phil Chaffee talked with Jacques Peythieu, who heads Orano's conversion and enrichment business unit, about Orano's market views.

Q: Since Russia's invasion of Ukraine in February we've seen huge changes in the uranium conversion and enrichment markets, prompting many market players to express supply concerns. Is this situation temporary? Where do you see the market going from here?

A: We are still in the fog of war. We don't know whether there will be an embargo from Russia similar to what they've done for gas. The other question mark is [Western] state policies. There are strong statements, both from the US and the European Union, saying that we need to reduce dependency on Russia. In the US they already have an EUP [enriched uranium product] quota that maybe they will reinforce, but we have not seen any decision. And in Europe its also unclear. So for utilities there's not much visibility.

But what is more definitive is that there is a change of mind in at least some of the utilities, maybe not all of them. Some utilities clearly now understand that price is not the only factor in selecting a supplier, but there's also security of supply.

Q: Are you seeing this shift in concrete contractual terms?

A: I won't give any details but what's clear is that there is momentum from some of the utilities. Maybe because their share of Russian imports is quite large, or because they were not completely covered, or they want to build additional inventories to have a backup. I think it's true for Orano and for our competitors. There is also the reaction of the utilities to use all the [contractual volume] flexibilities.

Q: Specifically in Eastern Europe, we've seen multiple operators be very public about wanting to shift away from Rosatom subsidiary Tvel for their VVER fuel supply. Are you seeing evidence that these operators are also shifting away from Rosatom for the underlying EUP in that fuel? Is that a market a potential prospect for you?

A: Yes. For sure. Maybe it will be more gradual.

Q: In terms additional capacity, you're obviously still ramping Comurhex II, but that should be done by 2024, and I think GBII is at capacity. These were massive investments for Orano and for its predecessor Areva. What would it take for you to decide you need more capacity in either conversion or enrichment than you've brought on?

A: For us there are different considerations for conversion and enrichment.

For conversion we have big facilities, and we have done our part of the job to secure the industry. We have the newest facility. So for us the priority is not to expand capacity, it is to achieve the ramp-up of our conversion facility. And for the time being, we don't have strong signals from the customer for conversion, which is a surprise. But that's the case. They are more worried about enrichment than conversion.

For enrichment we are a smaller producer, and it's true that there is the momentum we discussed. We can envision extending capacities, but it will be subject to long-term customer commitments. Because for us to get the investment approved by our board, we must have a normal return on investment. We are ready to to investigate the expansion of capacity, but we need commercial support from our customers. And I think what is important for customers is clear visibility from governments about what they want to do about the level of Russian supplies.

Q: So any future sanctions against Rosatom might very quickly ramp up customer commitments?

A: Yes. As mentioned, the conversion market is very tight. Due to our transition from Comurhex I to Philippe Coste, and the fact that ConverDyn [marketer of output from the US Metropolis UF6 plant, which] was suspended, I'm not sure that there are enough inventories in the market for utilities too reliant on Russian supplies.

Q: Although it sounds like enrichment is where you're open to building new capacities. In terms of that, what would it take to add enrichment capacity? Assuming you got firm customer commitments, built out an order book for additional enrichment capacity, and your board approved additional investment, what would the lag be between that decision and bringing on the new capacity? Because you have to put in an order at ETC [the centrifuge-manufacturing joint-venture with Urenco], and ETC has not been producing centrifuges for several years. Are we talking two or three years? How long would it take to really get that new capacity in place?

A: We are working with our partner Urenco to help ETC to ramp up...

Q: Already you're doing this?

A: To prepare — just in case there are some decisions to add capacities. And after, as far as we are concerned, there will be a regulatory process, and we think that we can have additional capacities by the end of the decade. It will take five or six years to build.

Q: Quite a while.

A: That's why we need to rely on inventories and existing production for the years to come.

Q: I know Urenco was underfeeding [UF6 into the centrifuges] at its enrichment facilities. Were you also doing a lot of underfeeding at GBII, and is that done now? Are you switching to overfeeding?

A: No, we cannot switch so easily. And I think it's the same for Urenco. Because the conversion market is so tight, there is not enough physical UF6 to do overfeeding today. So for me switching from underfeeding to overfeeding is more for the second part of the decade than the first part of the decade.

Q: On that issue of UF6, I've been talking to market sources this week and I've heard that as you've ramped it there have been quality issues with some of the output at Philippe Coste, and getting it qualified at Urenco. True?

A: No. There have been no quality issues. Our UF6 was qualified by Urenco, and we have already sent UF6 to Urenco facilities and I guess they have processed it. For us there is no quality issue.

Q: Not even a year ago?

A: No.

Q: Given how low your production was, my understanding is that you've been borrowing material to supply customer contracts. As Philippe Coste reaches nameplate production capacity of 15,000 tons UF6, is a lot of that output not actually going to customers, but simply going to repay loans of UF6?

A: We're not giving any details on this. But you are right: if there are loans, you have to reimburse the loans.

Q: Moving into enrichment, you're obviously not talking about new capacity in the short term. But next year you are talking about producing low-enriched uranium up to 6% U-235. Who is the final customer for that higher-enriched LEU?

A: Today, clearly, the momentum is coming from the US. We'll be ready to supply uranium of higher enrichment maybe by the end of 2023, or 2024, if there is the commercial demand.

Q: Why do you think the commercial demand is coming from US utilities and not operators in Europe or Asia?

A: I think that in terms of increased burnup it was always the US that took the lead. And European utilities are waiting for the lessons-learned coming from the US.

Q: We're certainly seeing momentum on even greater enrichment levels, for High-Assay LEU (Haleu), up to 20% U-235. Do you think US enrichers will own this market? I know you've expressed willingness to supply Haleu in France, but given that the US government is talking about spending massive amounts of money on securing domestic Haleu production, will the Haleu market naturally be an American one?

A: For the time being, you are right. It's more driven by the US, and we welcome the DOE [US Department of Energy] initiative to allocate a significant budget to develop a supply chain solution.

When you mention Haleu, people think about enrichment. But in our view the deconversion is maybe more tricky...

Q: For the deconversion of the Haleu product?

A: Right. Because you have deconversion in oxide, but you have also deconversion in metal. For example, the TerraPower initiative is with a metallic fuel. And I don't know a lot of companies able to produce metal from UF6. We are one of them, but there are not so many. And so we give an alert: Haleu is not only an issue of enrichment, but it's also an issue of deconversion.

Q: I'd also like to talk about depleted uranium. Historically Orano sent depleted uranium to Russia for re-enrichment. Has this continued?

A: That was 20 years ago. We have not recently sent depleted uranium to Russia. We deconvert our depleted uranium into a stable U3O8 form, and we are waiting for a better time to re-enrich it. But today, with the price of enrichment and the price of uranium, it's not very competitive to re-enrich depleted uranium.

Q: Meanwhile EDF has an arrangement with Rosatom for processing reprocessed uranium (RepU) from Orano's back-end recycling plant at La Hague into EUP for commercial use in EDF reactors. I think that this arrangement continues, but obviously geopolitics may change things. Have you seen any interest in France for a non-Russian source of usable commercial RepU?

A: We have the technical capabilities to do it. We did it in the past. These facilities do not currently exist; we'll have to build new facilities to convert RepU into UF6. We are fully supportive of a European supply chain to do that. But EDF, which is the owner of the RepU, will be the one who will decide the strategy. We are just a supplier; they are the customer.

Q: What would these new facilities be?

A: First you have to convert it.

Q: But you can't do that with Comurhex II facilities?

A: No, because Philippe Coste plant is not licensed for RepU, and we don't want to mix RepU with natural UF6. You also need a dedicated line in the enrichment facilities. We'd need dedicated facilities. It will be based on the same process of conversion from U3O8 to UF6, and afterward you have to enrich reprocessed UF6.

Q: Finally, the facility to convert depleted uranium into UO2 is under construction at Malvesi. Output from that facility will then be blended with plutonium at Orano's Melox facility to create mixed-oxide (Mox) fuel. What's the status of the UO2 plant construction project?

A: The project is finished and we are currently commissioning [the plant]. We expect commercial production in the first quarter of next year.

Q: And how long will the ramp-up be to nameplate capacity?

A: Maybe one or two years. Melox needs 120 tons UO2 [annually], and Malvesi's capacity is higher.

Q: So you won't necessarily produce at maximal capacity—just what is needed by Melox?

A: Yes. We follow our customers' needs.