The Euratom Supply Agency’s (ESA’s) latest annual report focuses to a large extent on efforts to reduce dependence on Russia as a supplier of nuclear materials and services. In his Foreword to the 104-page report, ESA Director-General Michael Hübel says the Agency “finds itself in a complex and challenging environment”
The nuclear supply market in 2023 continued to face supply uncertainties linked to the impact of the conflict in Ukraine “and the need to diversify from Russian supply and a changing geopolitical environment”. At the same time, plans in some countries to extend or expand nuclear power generation, the emergence of innovative designs such as small and advanced modular reactors, and the growing interest in the use of radioisotopes for medical purposes, “are changing the supply landscape for nuclear material in Europe”, he notes.
“In this situation of change and uncertainty, the Euratom Supply Agency continues to play its central role – ensuring the security of supply of nuclear materials. ESA – by using its legal prerogatives, by providing reliable market analysis and by working closely with the EU/Euratom institutions, partners in member states and industry.”
Hübel adds that there have been important steps forward in addressing the challenges. “This report shows significant progress in the security of supply for VVER reactors for most countries. It also shows important challenges ahead, notably in relation to diversification in conversion and enrichment services.”
Building upon ESA’s analysis of the market situation, the report “contains recommendations to support market actors to navigate the complex environment we operate in”. The new reality of security of supply also strongly affects to Agency itself, he notes.
“For the second year, ESA had to mobilise and concentrate our resources on crisis management. The arrival of new market actors and the emergence of new technologies means that new supply chains will be developed. In the coming years, ESA will have to be prepared to support a range of new partners, handle an increasing number of transactions and be able to analyse and report on market developments in a more dynamic way.”
In 2023, nuclear power accounted for approximately 23% of the EU’s total electricity generation, with 103 operational reactor units. The EU’s demand for natural uranium accounts for about 22% of global needs. Utilities have been purchasing more material than they load into reactors, a trend driven by the geopolitical tensions resulting from the Ukraine conflict. On the supply side, EU utilities continue to diversify their sources of nuclear fuel, particularly for VVER reactors, to mitigate dependency on single suppliers and designs or reduce high-risk supplies. The report says nearly all countries operating Russian-designed reactors are progressing in licensing alternative fuel designs, with promising developments expected in the near future.
In terms of the global nuclear fuel market, 2023 saw some significant developments, influenced by geopolitical tensions, which drove up prices across the nuclear fuel cycle. Nonetheless, there was increasing interest in the role of nuclear energy in achieving 2050 climate objectives. Rising prices for uranium and related services prompted countries to consider reactivating dormant facilities and expanding capacity in western countries. The uranium market faced geopolitical challenges and production disruptions, which pushed up prices and raised concerns about future supplies. In response, countries reported noteworthy agreements and advancements in uranium mining and conversion, including action to increase conversion capacity in the US, UK and EU.
“Russia’s invasion of Ukraine has created a new context for the EU’s security of supply for nuclear materials and services,” the report notes. In response, the EU and other countries “have adopted far-reaching restrictive measures in a range of areas, targeting organisations, individuals and certain activities, but also affecting transport and trade”. So far, nuclear fuel and services have been exempted from direct restrictions. “Meanwhile, various challenges have emerged affecting transport routes, in particular nuclear fuel logistics, and connected financial transactions as a result of measures in areas other than nuclear and/or from third countries.”
The global situation is also evolving with the US moving towards a ban on uranium imports from Russia. “There are concerns that markets could further tighten and become more limited, given the dependencies in particular in conversion and enrichment capacities, and in the supply of fuel to operate Russian-designed reactors. Since 2022, almost all EU operators of VVER nuclear reactors have contractually diversified their nuclear fuel supply.”
Some utilities operating VVER reactors have been building fresh fuel stocks to cover the period until alternative fuels – including related plant adaptations – are completed and licensed. Other operators purchased higher quantities of enriched products as part of their security of supply measures. “This meant that deliveries of natural uranium and services at all stages of the nuclear fuel cycle increased in 2023. This includes deliveries from Russia, driven by VVER fuel stockpiling”. However, “at this stage, the increase should not be read as an indication of a trend or heightened EU dependency on Russian supplies”.
On uranium supplies, the report says deliveries of natural uranium to EU utilities remain diversified. Canada, Russia, Kazakhstan and Niger provided more than 91% of the natural uranium delivered to the EU. “Nevertheless, there is a concentration of supply originated in the CIS [Commonwealth of Independent States] region, including a significant part from Russia. Russian supply to EU utilities in 2023 increased by 72% driven up by the deliveries of VVER fuel for stockpiling.” At the same time, non-Russian supplies also continued to grow in particular from Canada. “Despite the volume of deliveries from Africa decreasing, there is noteworthy growth from countries other than Niger, particularly from Namibia.”
As to conversion services, Orano remained the largest supplier, although its deliveries fell by 6%. At the same time, Cameco supplies increased and there was a significant increase in conversion services provided by Converdyn. “Due to the effect of VVER fresh fuel stockpiling, Russian supplies were higher than in 2022 (almost 45%). Consistently, the proportion of conversion provided as part of contracts ‘bundled’ with other services (fresh fuel fabrication, EUP) increased from one third in 2022 to 39% as, for most ‘bundled’ VVER contracts, conversion services are carried out in Russia.”
In 2023, enrichment service deliveries to EU utilities were 12% higher than in 2022. As for sources of supply of enriched uranium to EU utilities, 55% of enrichment services originated in the EU. “Deliveries of separative work from Russia to EU utilities accounted for 38% of the total (30% in 2022) and the volume delivered to western-type reactor operators remained at the same level as 2022.”
With respect to fuel, most EU utilities have access to at least two alternative fuel fabricators, the report notes. “In contrast to the situation elsewhere in the EU, dependence on a single design and supplier of fuel for water-water energy reactors (VVER) remains a significant vulnerability for the security of supply.”
Work continues to develop alternative fuel designs for VVER-440 reactors and to cooperate with suppliers other than the original suppliers. “In the meantime, utilities have increased their fuel stocks to fill the gap until alternative fuel is available and licensed. This has led to a further increase in the uranium, conversion and enrichment services delivered from Russia.”
In 2023, ESA conducted an analysis of the conversion and enrichment markets, which “highlighted potential capacity shortages in both conversion and enrichment sectors, especially in the ‘global west’, and the importance of contractually secure supplies and services for Euratom member states.”
The UK and United States have taken significant action to invest in their domestic capacity. “These developments are leading to a shift in the balance of global supply and demand for conversion and enrichment services as they increase open-market production capacity and help countries move away from unreliable supplies. Nonetheless, the future perspectives of the nuclear market remain uncertain…. Further investment in new capacity will be crucial to ensure a stable and reliable supply of conversion and enrichment services in the future.”
The report says that, “historically, Russia has gained market share by offering competitive prices, which has led to concerns among industry players about whether new investments in plant extensions would be profitable in the long term. To address these concerns, there is a need for long-term contracts and clear political commitments that provide assurances to investors.”
The ESA notes that foreign dependencies remain in several steps of the medical radioisotope supply chain, which “could endanger the EU’s strong position in producing medical radioisotopes and the development and application of nuclear medicine products and procedures.”
One of the key conditions for the uninterrupted supply of medical radioisotopes is the availability of nuclear materials for the production of irradiation targets and fuel for research reactors. “High-assay low-enriched uranium (HALEU) is currently not produced in the EU and can only be imported from the US or Russia. Current US production is based on down-blending of inventories estimated to last until 2035-2040, depending on the rate of use of the existing stockpile.”
The ESA also notes as a point of concern the dependence on Russia for the enrichment of stable isotopes needed to produce several new medical radioisotopes.
In summary, the ESA concludes that, “at least in the medium and long term, EU utilities’ demand for natural uranium, fuel fabrication and related services face challenges and different degree of risks related to the geopolitical situation”. In fuel fabrication, 100% reliance on a single design and supplier of VVER fuel “remains to some extent a concern as all but one of the utilities concerned are moving forward with fuel diversification and have been building fresh fuel stocks to tide them over until their diversification process is completed”. In the short term, a limited number of utilities remain contractually bound for all supply to a single supplier.
“An analysis of the nuclear industry (converters and enrichers) indicates that the total open-market conversion and enrichment capacities may not be sufficient to cover the short-term residual requirements if the services from current non-open market players such as Russia are no longer available. Building the additional conversion and enrichment capacity required could take several years and would require significant investments.”
