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Nuclear Fuel Market: Canadian Sanctions Threaten Russian Trade

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ss2130556298-Russia Sanctions

Rosatom subsidiary Tenex and its US utility clients may face a major challenge in 2023, as concerns grow that Ottawa may not extend a sanctions waiver allowing the Canadian-domiciled commercial shipper CISN Atlantic Ro-Ro to continue moving enriched uranium product (EUP) and uranium from the port of St. Petersburg to the US.

On Aug. 1, 2022, Canada granted CISN Shipping Group, the parent company of Atlantic Project II owner Atlantic Ro-Ro Carriers, a one-year exemption from sanctions imposed on Jul. 7 in response to Russia's invasion of Ukraine. The sanctions prohibit any Canadian person or entity from providing any service to any Russian entity or person, including water transportation and chemical manufacturing and chemical products.

A decision to let the exemption expire on Aug. 1 of this year would have a detrimental effect on Tenex, which supplies Russian EUP to multiple US utilities. Now the Rosatom subsidiary may have to scramble to secure a carrier willing to move Class 7 material that isn’t flagged Canadian or Russian.

In May last year Washington imposed sanctions on seven Russian shipping companies and a few dozen vessels. And globally fewer and fewer carriers are willing to move Class 7 material and those that do are having a hard time insuring it. That means Tenex may have to charter a specialized vessel, which could be a lot more costly.

If Russia is impeded from shipping to the US, it could declare force majeure, which would leave some big US nuclear power operators in a tight spot. That could also result in the Russian supplier putting a bigger discount on Russian material. In December, the spot price for enrichment from Russia was marked at $100 per separate work unit, a $10 discount from European enrichers Urenco and Orano.

Several countries, including China, India, South Korea, Belarus and Brazil, are likely keen to continue buying Russian material. France also continues to work with Russia’s Rosatom on newbuild projects and in the receipt of nuclear fuel shipments from St. Petersburg at the port of Dunkirk, but it is under growing pressure to sever ties with the Russian nuclear giant.

Another more controversial option is the potential for China to supply EUP to the US. Energy Intelligence understands that one US utility signed a deal for Chinese EUP in the fourth quarter 2022. Theoretically this could be scaled up, with China purchasing Russian EUP for its own use and then selling Chinese-origin EUP into the US. Sources questioned how economically viable that would be for China and one US buyer scoffed, suggesting that such an activity, if scaled up, would likely be squashed by the US State Department, which has taken a protectionist approach to nuclear trade with Russia and China.

Chinese EUP imports still face Trump-era tariffs, just as Washington limits Russian EUP imports via the 2020 amendment to the Russian Suspension Agreement (RSA). And with the restraint of the import limits of the RSA, which drop to 15% of US demand by the end of this decade, Russia’s Tenex is sold out until 2028. For US-based Centrus, which has contracts to resell Russian EUP in the US, any interruption to Russian supply risks harming its bottom line.

No matter what happens with the Canadian sanctions exemption for CISN Atlantic Ro-Ro, Canadian producer Cameco is clearly restricted from shipping anything via St. Petersburg. Cameco will likely continue to work with Kazatomprom to increase the efficiency of a Trans-Caspian trade route that avoids crossing Russia. But while this may make shipping Kazakh uranium practicable, it does nothing to solve Tenex's problems.

Meanwhile, in the uranium spot market, prices ticked higher this week, largely due to Sprott Asset Management’s uranium trust raising funds this week. With $24 million in cash on hand as of Jan. 11, the fund is poised to buy more uranium, which tends to excite uranium investors.

The momentum was enough to lift the spot price above $50 per pound for the first time since mid-November. The average price assessment delivered by Energy Intelligence's Uranium Price Panel rose this week to $50.37/lb. U3O8, from $48.56/lb. U3O8 on Jan. 5.

Uranium Price Panel
 Chg.1/121/512/2212/1512/812/111/2411/1711/1011/310/2710/2010/1310/69/299/229/159/89/18/258/188/118/47/287/217/147/76/306/236/166/96/25/265/195/125/54/284/214/144/73/313/243/17
Price ($/lb U3O8)1.8150.3748.5647.8647.6948.0449.4349.9950.0650.1651.2052.3352.0049.6347.8848.5449.8250.0351.8352.5048.3847.7547.6347.8448.8546.0346.0447.5350.0047.1347.3952.2549.4046.6747.1450.4154.0052.1361.2863.8863.0757.9458.3456.00
                                             
Total Assessments2.0010.008.009.0010.008.008.009.0010.0011.008.009.0010.0012.009.008.0010.0010.008.008.009.0010.009.008.009.0010.009.0010.0010.0010.0011.0010.0010.0012.0010.009.0011.009.0010.0010.009.0010.009.009.00
% within 1 StDev27.5090.0062.5055.5690.0075.0075.0077.7890.0072.7362.5066.6770.0083.3377.7887.5060.0070.0075.0062.5077.7880.0077.7875.0055.5680.0055.5670.0060.0090.0072.7370.0040.0075.0080.0077.7872.7355.5660.0090.0077.7880.0066.6766.67
Low ($/lb U3O8)2.0050.2548.2547.5047.5047.5049.0049.9050.0049.9050.0051.9051.5049.0047.5048.2549.0049.0051.2552.0048.0047.5047.2547.5048.5045.7545.5047.0049.2547.0046.6051.7049.0046.0047.0049.0053.5051.2559.0063.7563.0057.5058.0055.00
High ($/lb U3O8)1.2550.5049.2548.7548.0048.5050.0050.1050.2551.0052.2053.0052.5050.5048.2549.0051.0051.0052.0053.5049.0048.2548.0048.2549.2546.2546.7548.5050.7547.5048.5052.5050.1547.5047.5052.0055.0053.0063.2564.0063.5058.7558.5057.00
Variability*-0.310.040.350.380.140.100.000.000.130.460.620.110.250.750.070.081.000.380.190.390.380.250.040.000.000.000.310.500.160.060.090.400.320.050.000.280.500.500.750.080.000.280.130.50

Topics:
Nuclear Fuel, Trade
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