Uranium in the US: a domestic market on the rise or an industry in trouble?

Scarlett Evans 8 July 2019 (Last Updated July 8th, 2019 14:41)

A petition to limit imports of uranium in the US as a matter of national security has left the industry divided. While it may benefit local miners, nuclear companies have warned it will drive up prices and cause more problems for an energy source already under threat from renewable competition. So is the proposal viable?

Uranium in the US: a domestic market on the rise or an industry in trouble?
The Mi Vida uranium mine in Utah. US firms have called for a quarter of the country’s radioactive fuel to come from domestic sources. Credit: Matt Affolter

Two US-based uranium companies – Energy Fuels and Ur-Energy – have launched a petition to limit uranium imports in the name of energy security. The firms are calling for US utilities to source at least 25% of the radioactive fuel from domestic sources, seeking quotas under Section 232 of the 1962 trade law, which deals with national security. A response from the White House is expected in July, when the Commerce Department is also set to investigate the request, considering it under the same law used to impose tariffs on steel and aluminium imports in 2018.

Can the US meet demand?

America currently receives uranium from a number of sources, including Russia, China, Kazakhstan and Uzbekistan, while figures from the Commerce Department estimate that in 2017 Canada and Australia provided uranium for more than half of the US’s consumption.

A quota of even 10% equates between 4-5 million pounds (Mlbs) of uranium, and to meet the proposed tariff requirements the US would have to produce around 12Mlbs of uranium each year. This is compared to the estimated 1Mlbs produced in 2017 by the country’s domestic uranium sector.

Industry members are sceptical as to whether imposing quotas will stimulate production, with a report from Eight Capital saying tariffs would not motivate a boost until the rest of the world were unable to fill the supply gap, reading; “It would…make that foreign material more readily available to the global market, and global prices might react negatively.” The report speculates that even if uranium prices rose sufficiently, America could cover only 10% of reactor requirements by 2021.

With such a challenge faced by an already struggling industry, it’s no surprise some are questioning the benefits of such a move. However, the petitioners say it is a necessary one.

Why impose tariffs?

“We believe import limitations on uranium are absolutely crucial for US national security and energy security,” says Curtis Moore, V.P. marketing and corporate development for Energy Fuels. “We believe the US needs to maintain some form of a viable nuclear fuel industry, including uranium mining, to make sure we have an industry able to respond when we need more fuel and nuclear material.”

According to Moore, the US receives a third of its nuclear fuel from ‘geopolitical adversaries’ such as Russia. He argues such reliance could potentially endanger both the energy market and the military – where uranium is used for weapons, submarines and aircraft carriers. Due to the flexibility of Section 232, it would be possible for quotas to be targeted toward certain countries while bypassing allies such as Canada and Australia, however due to the unstable nature of the global uranium industry there is no guarantee even friendly markets can provide consistent supply.

“Russia currently controls about 7% of the US electrical grid,” Moore says. “The situation is likely to grow far worse in the coming years. Of course, uranium mining in the US is dropping, but it is also dropping in our allies like Canada and Australia.”

Indeed, uranium companies worldwide have been facing closures, for example Australia’s Ranger mine – one of the largest free market uranium mines in the world – is expected to halt production in either 2020 or 2021.

“It is not an exaggeration to state that the entire ‘free-market’ for uranium may be collapsing around the world right now,” Moore says, “with the vacuum being filled by state-owned entities in nations like Russia, China and their allies.”

He adds; “Do we want to be in a position where Russia, China and their allies exert almost complete control over the global nuclear industry?  This would be highly dangerous, and it would likely lead to an enormous increase in the proliferation of nuclear weapons across the world.”

Similarly, writing for Forbes, Hudson Institute senior fellow Thomas J. Duesterberg said allowing Russian and Chinese dominance of the uranium market would be ‘a mistake’, urging “a serious look at maintaining our uranium suppliers by accepting the Section 232 petition for review.”

However, despite the confidence of the quota proponents, not everyone is convinced.

“Most industry people say imposing import quotas will not benefit the nuclear industry, though it would likely benefit a few select miners,” says Bloomberg analyst Chris Gadomski.  “Common sense suggests that imposing uranium quotas will not move forward on a purely economic basis, but in the current political environment, it is hard to predict how political twists can turn the page.”

Others, such as nuclear proliferation expert at the Union of Concerned Scientists Edwin Lyman, dismiss the request entirely.

“We think the assertion that US national security is being harmed by its reliance on uranium imports is without merit,” Lyman says. “The US imports much of its uranium from staunch allies such as Australia, and I would consider that supply at low risk of being cut off. The claim is being raised by small, high-cost domestic uranium producers who hope that the Trump administration’s protectionist trade policies can give a boost to their uneconomic enterprises.”

An economic choice?

Moore predicts the quotas will have ‘almost no effect’ on the US economy, costing between $200m- $300m. However, other industry members set the figure significantly higher.

A 2018 Nuclear Energy Institute study said research behind the proposed figure was ‘deeply flawed’, as it is apparently based on a data sample of US production levels “well below the level…needed to support the proposed quota”. The study concludes that such limitations would in fact only exacerbate economic pressure on the US nuclear industry, with expensive domestic uranium replacing cheaper imported fuel. The study sets the additional costs on the industry at between $500m-$800m per year, a figure that could potentially be higher in the policy’s early years if implemented without a phase-in or other protections against price spikes.

“We sympathise with the plight of uranium suppliers,” NEI President Maria Korsnick said in a statement. “However, NEI does not support the implementation of quotas as described in the petition. Potential remedies could put even more generating units at risk for premature closure, which would further soften the market for uranium.”

Similarly, a report from Australian resources development company Vimy says a universal import tariff on uranium “would need to be so high to incentivise new US production, that it would inevitably damage the competitive position of the US nuclear utilities.”