Normally, we stay away from talking about nuclear fuel market issues on our atompeace website, as that subject is addressed in detail in UxC’s main publications.  This website focuses on peaceful uses of the atom and new advances and concepts that can further that goal, the chief one being the expansion of nuclear energy globally.  However, this expansion cannot reach its full potential without a robust nuclear fuel industry and market.  With Russia’s invasion of Ukraine, the market has been fractured and made more uncertain, making nuclear fuel investments and deployment more challenging.

Over the past four decades, our goal at UxC has been to bring more price information to the industry to make the market function more efficiently. The Uranium Exchange Company (Ux), the predecessor of UxC, created the first weekly spot price in 1987. Concerned that spot prices alone did not reflect the future scarcity of uranium to the extent necessary to support new uranium investments and procurement decisions, in 2004 UxC began publishing a long-term uranium indicator and also pushed for the establishment of a forwards market, which eventually developed with the help of brokers like Numerco. In 2007, along with NYMEX (now CME), we created the first and only uranium futures contract (the UX contract). The futures contract financially settles on the month-end Ux U3O8 Price®, which also means that this is the only regulated uranium price in the world through oversight by the U.S. Commodity Futures Trading Commission (CFTC). More recently, to give even more visibility to the market, we introduced a daily spot price in 2021 after being the first to publish a daily spot Broker Average Price (BAP) beginning in 2009. Other UxC price reporting enhancements over the years have included: 3-Year and 5-Year Forward Prices and converter-specific location prices for spot U3O8.

We believe these price advancements have served to improve the function of the market. While prices declined notably after the 2011 Fukushima accident, the recovery of price one decade later has not been as abrupt or disconcerting as the increase in the 2005-2007 period, even after Russia’s invasion of Ukraine. In today’s dollars, the 2007 price reached a level of over $190, over three times more than today’s sub-$60 price. Of course, we not only report uranium prices, but enrichment and conversion prices as well. These other prices have shown significant upheaval following Russia’s invasion of Ukraine. Uranium prices have increased, but not to the same extent.

In many ways, Russia’s invasion of Ukraine was like the Fukushima accident but having the exact opposite effect on the nuclear fuel market. It was similar in the sense that it resulted in markedly changed behavior that will persist for a long time. Fukushima had the effect of countries cutting back on nuclear, and in Germany’s case eliminating nuclear from its energy portfolio. Russia’s invasion had countries cutting ties with Russia and in many cases re-embracing nuclear due to concerns about energy security now that Russia was being pushed out of the picture. In some sense, Russia’s invasion was sort of a “reverse Fukushima” in that it has counteracted the negative effects of Fukushima on nuclear fuel demand, effects that might have persisted for a good while longer without the reaction to the invasion.

To a significant degree, the impact of Russia’s invasion of Ukraine and Russia’s disassociation from the West will have a much greater impact on the nuclear fuel market than the Fukushima accident. The restructuring of Russian energy flows, which is currently ongoing, is impacting nuclear fuel. Russia’s formidable position in nuclear fuel is much more significant than its role in oil and natural gas, although these fuels get more attention. A key question is how the removal of Russia in certain parts of the nuclear fuel market will ultimately affect the market and, along with it, the prospects for the future expansion of nuclear energy.

Current nuclear fuel prices cannot completely capture the full extent of this uncertainty. Unlike the earlier period, when too much reliance was placed on spot prices, it is difficult, if not impossible, to implement any enhancements in price reporting that can improve on this situation. Supply risk in enrichment has already translated into higher SWU prices, but the full effect has not likely been felt in uranium, which is a substitute for enrichment. Indeed, the full effect on enrichment prices likely has also not yet been registered in SWU prices, as the extent and duration of Russia’s separation and the industry reactions to it are not yet known.

The country that is geographically closest to Russia but ideologically far away from Russia is Ukraine. Early on, Ukraine recognized this separation and decided to move forward on nuclear without any reliance on Russia. One recently signed contract that epitomizes the new commercial realities and the tectonic shift that is going on in the nuclear fuel market is a large UF6 contract between Cameco and Energoatom. Ukraine’s decision to move away from Russia, while not surprising, is significant. Ukraine has the world’s 7th largest installed nuclear capacity, making it one of the most important markets for nuclear fuel.

Both Energoatom and Cameco should be commended for moving forward in this uncertain environment, as both are betting on the future of nuclear energy in Ukraine and the future of Ukraine itself. Ukraine has shown every indication that it will expand its nuclear power capacity, most recently through deals with Holtec and Westinghouse. Energoatom also knows that it must secure an adequate future uranium supply to make its nuclear energy aspirations a reality given that it has moved away from Russia as a nuclear fuel supplier. If you believe in the future of nuclear energy, it is hard to find a more compelling story than that of Ukraine.

The value of nuclear fuel has increased in response to Russia’s invasion of Ukraine, as supply risks have increased. How uranium will continue to be valued in today’s environment of increasing dependence on nuclear energy is an intriguing question. The value proposition for nuclear fuel is not limited to just the commercial prices for the fuel but includes any government investments, such as buying uranium and supporting the expansion of enrichment and conversion capacity, as it seeks to address important externalities such as climate change, energy security, and nonproliferation, externalities that have only grown in recent years. Given the uncertainties facing the nuclear fuel market and energy markets in general, it is likely that commercial entities and governments will be struggling with this value question for years to come. At UxC, we will continue to do our part to supply the market with accurate and timely market and price information to help inform the various critical decisions that must be made to support the ongoing expansion and improvement of nuclear power across the globe.

This article was originally published in the July 10, 2023 issue of the Ux Weekly.

Portrait: Jeff Combs
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Jeff Combs is founder, owner, and Chairman of UxC, LLC (UxC) and is a leading expert in the nuclear fuel market, with over 45 years of experience providing economic analysis and forecasting for the front-end of the nuclear fuel cycle. He has extensive and varied expertise, overseeing UxC market reports, providing strategic consulting to major commercial companies in the nuclear fuel industry, and advising governments and international organizations on market and policy issues. Under his management, UxC has grown to become the world’s pre-eminent nuclear fuel market information and analysis company, issuing reports and publishing prices for all front-end nuclear fuel markets. In 2007, UxC teamed with CME/NYMEX to introduce the world’s first uranium futures contract. That same year UxC began reporting on the backend of the fuel cycle. In 2018, Mr. Combs created the website to advance understanding of peaceful uses of the atom in today’s world. During his career, Mr. Combs has presented papers at a variety of nuclear industry and energy economics conferences throughout the world. In addition, he has had his work published in academic and public policy journals. Mr. Combs earned a bachelor's degree in Economics at the University of Virginia, where he also completed his doctoral course work in economics. He is a charter member of the International Association of Energy Economics and is a member of the American Nuclear Society.