Indeed, the uranium supply chain is as sensitive to geopolitical manipulation as those of natural gas, cobalt and rare earths. If developed countries are to rely on atomic energy as a reliable source of carbon-free energy in the 2030s and 2040s, they are going to have to start locking in mineral resources now.
Almost three-quarters of nuclear generation occurs in Europe, North America and developed parts of Asia. However, rich countries and their allies provide only 19% of the 75,000 metric tons of uranium oxide needed to fuel these reactors each year. China, the former Soviet Union, Iran and Pakistan together accounted for 62% of mining production in 2021. India and traditionally non-aligned countries in Africa produce the rest.
This situation is the result of the heartbreaking changes that the world uranium market has undergone over the past few decades. In the late 2000s, it was widely believed that solar and wind would remain too expensive to compete with conventional generation well into the 2030s. This raised expectations of a boom in nuclear energy as the sole source viable large-scale carbon-free energy. This in turn sparked a development rush in Kazakhstan, blessed with vast near-surface uranium deposits that can be mined cheaply by pumping fluids underground in a process similar to hydraulic fracturing.
The 2011 Fukushima Daiichi nuclear disaster shattered those prospects, reducing nuclear output by 11% in two years and halting the growth of atomic energy for the first time since the 1960s. With the arrival of new Kazakh supplies, the market has entered a deep glut. Until uranium oxide prices started to recover above $30 a pound last year, most miners outside of Central Asia were operating at a loss.
Kazakhstan alone now supplies more than 40% of the world’s uranium. Nur-Sultan’s government has often strained relations with its former colonist, especially since the invasion of Ukraine underscored Moscow’s desire to keep the former Soviet states under its thumb. Yet it remains dependent on the goodwill of its neighbors to export its nuclear materials, which are normally transported overland. If a Ukrainian-style situation were to arise, in which developed democracies would stand against authoritarian rivals and control of energy supplies used as a weapon of war, even air cargo might not be enough to power Western reactors, since Kazakhstan is almost entirely surrounded by Russian, Chinese, Iranian and Pakistani airspace.
There are alternative sources. More than a quarter of the world’s uranium resources are in Australia, and 9% in Canada. BHP Group’s Olympic Dam northwest of Adelaide remains one of the largest deposits in the world. Its vast reserves of uranium could be produced at near zero cost since the main products of the mine would be copper and precious metals – but for nearly two decades leaders avoided the immense capital outlay needed to unlock this resource.
At the Nolans rare earths project near Alice Springs, a uranium resource measured at 13.3 million pounds in 2008 – enough to power a fleet of 20 reactors for 10 years – is now treated as waste, a cost to be managed in the operation of the mine rather than a source of income to be exploited.
“We have a long way to go before uranium becomes something people will talk about here in Australia,” said Gavin Lockyer, managing director of Arafura Resources Ltd., which is developing the site. Prior to Fukushima, flowcharts outlining Nolans ore processing listed uranium as a commodity, but it is now thought of so rarely that it is unclear at what price mining it would become viable. In theory, these early processing plans could be revived to exploit one of the world’s largest uranium resources, he said, but “that’s not on the agenda” at the moment. .
This overreliance on a low-cost, unreliable supplier is not so different from the situations we have seen in other critical commodities over the past few decades. Europe has always had alternatives to buying piped gas from Russia. Electric battery manufacturers could have worked harder to reduce their dependence on cobalt and source more from countries other than the Democratic Republic of Congo. Consumers of rare earth metals could have considered China’s increasing dominance in this supply chain and sought to diversify at an earlier stage. In each case, however, developed democracies have taken the approach of seeking the least expensive resources and hoping for the best.
It seems to be happening again. Much of the post-Ukrainian nuclear renaissance consists of plans to extend the life of existing reactors in Germany, Belgium, South Korea and the United States. Among the developed countries, only France, the United Kingdom and Japan have committed to building a significant number of new factories.
This scale of growth is unlikely to encourage investors to think funding marginal uranium mines is a good use of their money – and unless that changes, the global reliance on of the former Soviet Union will only take more root. European governments who have seen the cost of electricity increase 10-fold over the past year as Moscow shut off the gas taps have a taste of what the world looks like when you take your energy security for granted. There’s no better time than the present to make sure we don’t make the same mistake again.
More other writers at Bloomberg Opinion:
• Rejuvenating Reactors: Elements of Liam Denning
• Can Japan learn to love nuclear power again? : Gearoid Reidy
• Why Germany will regret the closure of its nuclear power plants: Bloomberg opinion
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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