The state of uranium

The latest edition of the "Red Book" reviews world uranium supply and demand, and provides a statistical profile of the world uranium industry as of 1 January 2001. In addition, it gives projections of reactor-related uranium requirements through 2020, and presents a perspective on uranium supply and demand through 2050.

Resources

Estimates of uranium resources are classified into conventional and unconventional categories. The resources classified as unconventional - in which uranium exists at very low grades, or is recovered as a minor by-product - include about 22 million tonnes that occur in phosphate deposits and up to 4 billion tonnes contained in seawater. Based on current technology, however, the unconventional resources have very high recovery costs.

Current estimates of conventional resources of uranium (known and undiscovered) total about 16.2 million tonnes of uranium (tU), or nearly 250 years of supply at today's rate of usage (around 64,000tU/year). Total known conventional resources in both the <$80/kgU and <$130/kgU categories were little changed in 2001 compared to their 1999 levels, at 3.107 million tU and 3.933 million tU respectively. However, known resources in the <$40/kgU category (>2.086 million tU) increased by about 66% compared to those reported in 1999, largely because Australia reported resources in this cost category for the first time.

Total undiscovered conventional resources are estimated at about 12.271 million tU in 2001. There were no significant changes in undiscovered resources among any of the countries reporting resources.

The fact that resource totals remained relatively unchanged between 1999 and 2001 suggests that new discoveries or transfer of resources to higher confidence categories approximately kept pace with production.

Exploration

Worldwide uranium exploration continues to be unevenly distributed geographically, with the majority of exploration expenditures being concentrated in areas considered to have the best likelihood for the discovery of economically attractive deposits.

Domestic exploration expenditures totalled about $83.29 million in 2000, a decrease of about $48.36 million or 37% compared to the 1998 total. Six countries (Australia, Canada, India, Russian Federation, USA and Uzbekistan) accounted for 94% of domestic exploration expenditures in 2000. However, all of these countries except India reported decreases in exploration expenditures compared to their 1998 totals. It is also important to note that around 70% of Uzbekistan's expenditure total, or $10.08 million was spent on development-related activities. Iran and Ukraine were the only other countries besides India to report increases in domestic exploration expenditures between 1998 and 2000.

The decline in exploration expenditures is expected to continue in 2001. Domestic exploration expenditures are expected to drop to about $52 million in 2001. Similarly, non-domestic exploration expenditures are expected to experience a sharp drop to only $3 million, 83% below the 1998 level.

Production

Uranium production in 2000 totalled 36,112tU compared to 32,179tU in 1999, an increase of about 12%.

A total of 21 countries reported production in 2000 compared to 23 producing countries in 1998, with Argentina, Belgium and Gabon ceasing production and Brazil restarting production. Australia and Kazakhstan had the most significant gains in production between 1998 and 2000, with increases of about 55% and 47% respectively. Conversely, the USA and Niger had the largest decreases in output at about 16% and 22% respectively.

Production in 2001 is expected to increase slightly compared to that in 2000. Production is planned to end in France and Portugal during 2001, but this loss of capacity is expected to be offset by increased production elsewhere. In 2000, underground mining accounted for 43% of total production; open pit mining, 28%; in situ leach mining, 15%; with co-product and by-product recovery from copper and gold operations and other unconventional methods accounting for most of the remaining 14%.

Demand

At the end of 2000, worldwide use of nuclear energy continued to grow at a rate equivalent to the average rate experienced over the past decade.

A total of 438 commercial nuclear reactors were operating with a net generating capacity of about 360GWe. World uranium production (36,112tU) provided about 56% of world reactor requirements (64,104tU). The rest of the requirements were met by secondary sources, including civilian and military stockpiles, uranium reprocessing and re-enrichment of depleted uranium.

Outlook to 2020

Uranium demand over the short-term is determined by nuclear capacity. Although there are uncertainties related to potential changes in world nuclear capacity, short-term uranium requirements are fairly predictable. Most of the nuclear capacity that is projected to exist in 2020 is already in operation or under construction. There is only a limited degree of uncertainty regarding construction lead times and implementation of plans for new units in some countries. There continues to be high levels of new construction in East Asia, and in the Middle East, Central and South Asia. Significant new construction is also planned in Central, Eastern and Southern Europe. There are early indications that new construction may be initiated in North America by 2020. Conversely, in Western Europe and Scandinavia, it appears that there will be a decline in capacity as Germany's plans to phase out nuclear power are fully implemented, despite expected offsets from construction in other parts of that region.

Improvements and modifications to nuclear reactor technology may also affect requirements, though the impact will probably take time to have a major effect. For example, improving burnup from 40 to 50GWd/tU decreases uranium requirements by 4-5% per kWh. Improved burnup also allows for the period between refuellings to be extended. This, coupled with the shortening of the time needed to perform these refuellings, has led to significant increases in availability factors over the past decade. As reactors provide more electricity, these improvements in technology could therefore result in an overall increase in uranium requirements. The trend to upgrade the power levels and extend the lives of operating reactors using various means also leads to higher uranium requirements.

The uranium market over the mid-term remains uncertain due to a lack of information on the nature and extent of secondary supplies. The increasing availability of supplies from the conversion of warhead material, together with recent increases in the commercial inventory, implies a continuing oversupplied, low-priced market. The low prices of uranium have caused a reduction in exploration and production, and a growing reliance on secondary supplies. This situation is reducing the prospects of a market recovery in the short-term.

Production and exploration are likely to remain low until sufficient evidence exists that secondary supplies, particularly inventories, are being exhausted, or that significant new requirements are emerging. However, given the long lead times required to increase primary production, the potential exists for supply and demand imbalances. Improved information on the nature and extent of world uranium inventories and other secondary sources is needed to allow more accurate forecasting, which would permit more timely production decisions.

Production capability for all uranium producing countries, based on existing, committed, planned and prospective production centres cannot satisfy future world uranium requirements. Thus, in the near-term, secondary sources are necessary to ensure adequate supplies.

In the longer-term, beginning around 2020, when secondary supplies decline to lower levels, reactor requirements will need to be met through the expansion of existing production capabilities, together with the development of additional production centres or the introduction of alternative fuel cycles. The lead-time for the development of new uranium production facilities is several years. Additionally, developing new uranium projects has become more difficult because of increasingly demanding radiation safety and environmental regulations, as well as the additional time required to meet licensing, permitting and environmental review procedures. Thus it will be important that decisions to pursue exploration and development of new resources and production capabilities be made in the near-term. Any extended production shortfall in the absence of secondary sources could destabilise the uranium market.

Uranium supply to 2050

In 1999, the IAEA assembled a team of consultants to evaluate the adequacy of supply to meet reactor uranium requirements through to 2050, and to characterise the level of confidence that can be placed in the projected supply. In 2001, the results were published in a report titled Analysis of Uranium Supply to 2050.

The following steps were taken in completing the study:

• Establish annual worldwide reactor demand.

• Identify all sources of uranium potentially available to fill reactor demand.

• Determine the most likely contribution that each source will make towards satisfying annual demand.

Three uranium demand cases were considered that cover a broad range of assumptions as to global economic growth and related growth in energy and nuclear power. The middle case assumes medium economic growth for the world's economy with sustained growth for nuclear power. The high case assumes a high economic growth rate accompanied by significant growth for nuclear power, while the low case assumes medium economic growth and a phase-out of nuclear power by 2100.

Secondary uranium supply was projected to cover 42% of demand in 2000. By 2025, this contribution is projected to drop to 6% and 4% of demand in the middle and high demand cases respectively.

With regard to primary supply, once the three demand cases were established, it was possible to project the annual availability of each of the components of secondary supply between 2000 and 2050. Secondary supply was then subtracted from projected annual reactor requirements to determine total primary supply requirements. Projections were made of the annual availability of non-market based

supply (CIS, China and national programmes) that was subtracted from total primary supply requirements to determine annual market-based production requirements, which will become increasingly important.

The market-based production requirements can be compared with the adequacy of uranium resources to meet those requirements. Annual market-based production requirements were assumed to be met first by the lowest cost production centre producing at projected nominal capacity. Progressively higher cost producers will fill remaining demand until annual demand is satisfied. Production from higher cost projects is deferred until they are cost competitive. A similar assessment is made for lower confidence resources. The report emphasises the role that undiscovered resources will need to play in satisfying market based production shortfalls from known resources in the latter part of the study period.

Based on this, the report reached the following conclusions:

• Cumulative market-based production requirements to 2050 are projected to total 5,158,280tU in the middle demand case, and 6,406,190tU and 1,917,990tU in the high and low demand cases respectively.

• Low and low-medium cost resources are adequate to meet market-based production requirements through to 2019 in the middle demand case. Inclusion of high-cost resources extends coverage to 2028.

• Production based on known resources in the low and low-medium cost categories is adequate to meet market-based production requirements to 2012 in the middle demand case. Total known resources in all cost categories extends coverage to 2034.

• Total known resources are nearly adequate to satisfy cumulative market-based production requirements. However, because of production timing and capacity constraints, not all resources will be utilised by 2050. Therefore, cumulative production derived from known resources will be adequate to satisfy only 80% of total market-based production requirements in the middle demand case, despite the fact that resources nearly equal demand.

• In the high demand case, resources are adequate to meet market-based production requirements only to 2029. The cumulative deficit between market-based production requirements and projected production in the high demand case could total 2.059 million tU. Speculative and/or unconventional resources will be required to satisfy this deficit.

• A cumulative shortfall of 844,500-2,950,350tU is projected between market-based production requirements and production in the middle and high demand cases respectively. To ensure a stable supply of relatively low-cost uranium needed to guarantee the future of nuclear power, major exploration expenditures will have to be made within the next 5-10 years, which will only happen if near-term demand and market prices support such expenditures. To have the greatest impact on reducing the projected deficits, discoveries need to be made early enough that they can accommodate long environmental reviews and development lead times, and still contribute to fulfilling production requirements in a timely manner.

• Each of the components of secondary and primary supply has risks and uncertainties - both negative and positive. Sensitivity studies were included in the report to address a wide range of uncertainties.

• Environmental opposition to uranium development could limit or significantly delay availability of low-cost market-based production. Therefore, a sensitivity study was included that shows the impact on supply-demand relationships if resources potentially subject to environmental or political opposition are removed from the resource base.

• The base case for HEU assumes that 250t of Russian HEU and 55t of HEU from the USA will be available that is in excess of current agreements, which will extend availability of uranium derived from HEU to 2023, ten years beyond the current US-Russian agreement. A sensitivity analysis was included to show the effect of limiting HEU availability to the current agreement (low HEU case) as well as extending availability to 2040 (high HEU case).

• A sensitivity study was also included that shows potential changes in production requirements imposed by limiting the use of MOX and reprocessed uranium, and the availability of depleted uranium.