If the flat-lined spot price and declining share values are any indication, the March 11 earthquake and tsunami-damaged Fukushima Dai-Ichi power station continues to have a devastating impact on the uranium industry worldwide. Fears of similar catastrophes happening closer to home have prompted nations like Germany, the UK, Finland, Italy and Switzerland to rethink their nuclear power programs.
Earlier this year, prior to the March meltdown, the spot price of uranium was trading at $70 per pound, but plunged to $49 per pound shortly after. Uranium spot prices have hovered around that mark for over five months, trading at $50.50 per pound near August’s end, prompting participants to label the market a “ghost town,” reports Ux Consulting Co., with sellers unwilling to part with their goods at such low prices and buyers not willing to pay more. The market is oversupplied after growing demand over the past few years had spurred a worldwide increase in uranium production.
In this post-Fukushima uranium market the one saving grace has been booming demand from energy-hungry Asian nations like China, on which the major players in the uranium industry have hung their hopes for future demand.
China has 14 operational nuclear reactors and according to the World Nuclear Association, 77 more reactors are either planned or under construction with aim toward increasing nuclear capacity to 80 GWe by 2020, 200 by 2030 and 400 GWe by 2050. However, the nation’s domestic uranium resources don’t even come close to the amount needed to fuel such an expansion. To secure uranium reserves, China has been aggressively moving to sign supply contracts and joint venture mining agreements as well as to purchase uranium mines overseas. By 2020, China is expected to account for 20 percent of global uranium demand, according to Resource Capital Research.
Slowing growth?
Despite the voracious appetite for uranium resources China has displayed over the past few years, recent reports indicate that the Fukushima tragedy may have dampened even China’s desire for nuclear power.
Following the disaster in March, China announced the suspension of new nuclear power plant approvals until the government completes a six-month long national nuclear facility safety check on existing plants and issues a revised nuclear development plan. Of course, the announcement further depressed uranium company share prices.
The setback has slowed uranium imports to China for the first half of 2011 by 13 percent year-on-year to 5,356 tons of uranium, meaning 2011 import levels are mostly likely not on track to match or beat the record 17,136 tons of uranium imported in 2010.
Despite the slump in imports, China’s continued search for uranium resources worldwide is evidence the Asian powerhouse is not giving up on its aggressive nuclear power program.
Uzbekistan deal signals China is still hungry for uranium
Although China’s quest for uranium resources has a global reach, the nation is particularly interested in resources close to home in Central Asia and has used its wealth and diplomatic influence to gain access to the region’s resources. China’s failed attempts to marshal a strong position in Mongolia over the last few years have been overshadowed by the country’s success in Kazakhstan and Uzbekistan.
Reports are surfacing that Uzbekistan and China are negotiating joint venture agreements to explore and develop Uzbekistan’s uranium sands fields. The Central Asian nation is the world’s seventh largest producer of uranium at nearly 2,500 tonnes of annual production, and twelfth largest in reserves estimated at 111,000 tonnes with more than 40 explored deposits.
The partnership between the Uzbekistan and China is not a new development. Bilateral trade has quadrupled since 2006, according to reports and the Central Asian nation now supplies a number of natural resources to China, including rare earths, natural gas, fertilizers and precious metals. In 2009, China and Uzbek mining authorities initiated a $4.6 million 50-50 joint venture with China’s CGNPC Uranium Resources to explore for resources in the Kyzyl Kum Desert in central Uzbekistan.
In April of this year, the two trading partners signed $5 billion in investment deals and Chinese banks agreed to $1.5 billion in credit lines for a number of Uzbek banks. No doubt these investment agreements have paved the way toward further Chinese involvement in the Uzbek state-controlled uranium sector.
Long-term uranium outlook remains positive
Despite the oversupply in the global market, Goldman Sachs analysts have said that current inventories are still less than 1990s levels, making a total market collapse unlikely, reports Paul French, Asian correspondent for Nuclear Energy Insider.
“Prices may be depressed post-Fukushima, but securing uranium is still a strategic national energy security goal for China, India and a number of other emergent nuclear nations,” said French.
