Uranium prices have been volatile over the past 30 years. The end of the Cold War curtailed the need for large stockpiles of military fissile materials, and the bleak prospect for civilian nuclear power during the 1990s enticed utilities to reduce their uranium inventories. So-called secondary uranium sources (reactor fuel derived from warheads, military and commercial inventories, re-enrichment of depleted uranium tails, as well as enriching at lower tail assays, reprocessed uranium and mixed oxide fuel) became increasingly available, e. g. through the 1993 agreement between the United States and the Russian Federation to convert highly enriched uranium (HEU) from nuclear warheads into low-enriched uranium for reactor fuel
(also known as the Megatonnes to Megawatt programme). Low-cost sec­ondary sources penetrating the uranium market and a general perception during the 1990s that nuclear power is a technology inevitably in decline suppressed uranium prices and mine production. Ever since 1990 annual fresh uranium production has fallen short of annual reactor requirements. Historically, low spot market prices threatened economic survival of many mines. Without clear long-term demand signals from the marketplace, the uranium industry has been reluctant to invest in new mine capacities or to pursue large-scale uranium exploration. Meanwhile, global production had progressively declined to less than 60% of reactor requirements. Clearly, uranium prices no longer reflected longer-term production capacities (Rogner, 2007).

Shortly after prices hit the historical low, a series of events uncovered the long-ignored demand/supply imbalance and caused prices to rise. On the demand side, since 1990 rising plant factors of the world’s nuclear fleet added incrementally to annual reactor fuel requirements the equivalent of more than 30 GWe. A series of licence renewals for existing reactors that began around the turn of the century sent plant operators out to secure fuel for another 20 years or so. Another change was the growth of nuclear power in the developing economies of China and India, countries that had either not participated in the market to a great extent or not participated at all. While demand was picking up momentum, supply from mine output con­tinued to be underprovided. In fact, in the face of rising demand several technical mishaps at major production centres reduced global mine output and prices began to rise. Moreover, the longer-term availability of second­ary sources from military arsenals is politically determined and thus uncer­tain and the bulk of future uranium supply had to be provided by additional mine output, i. e., investment in exploration and development of new mines and mills. Given lead times of 5-10 years for new mining capacity to come on-line, in the short run production cannot increase rapidly despite rising demand. Beginning in 2004, the general demand-driven price acceleration of fossil fuels, materials and commodities further aggravated uranium prices and, by 2007, spot prices had exploded almost 20-fold.

As for almost all commodities, uranium market conditions abruptly changed with the onset of the financial and economic crises in 2008. At the close of 2009 spot prices were about 35% below their mid-2007 peak of $350/kg U. Yet compared with other commodities, the uranium market weathered the storm fairly well. Uranium is generally better protected against aberrations than other markets. For one, short-run reactor uranium requirements are relatively stable as existing nuclear power plants are usually the lowest-cost generators on the grid and global annual reactor requirements of uranium of approximately 67,000 U remained unchanged. For another, most uranium (about 85%) is supplied under long-term con­tracts, where the pricing is shielded from sudden market fluctuations. New contracts or contract renewals then tend to also reflect the current spot price situation among other demand and supply factors. Typically, average long-term multiannual contract prices have been about half the going spot market price.

What brought down spot prices — in addition to the precipitous fall of energy, material and commodity prices — were those hedge funds and investors who since 2004 have traded in uranium and who, to a certain extent, added fuel to the 2004-08 spot price rally and, as a result of the financial crisis, were forced to sell their uranium positions due to cash requirements.

The longer-run price outlook, however, depends on whether or not above-ground investment in exploration and mining capacity will be forth­coming and mobilize the below-ground uranium resources. While global uranium resources are plentiful (NEA, 2010; Rogner, 2010) and the recent prices have stimulated both exploration and investment in new mining capacity, it remains to be seen if these are sufficient to meet additional demand caused by the expected nuclear renaissance but also to compensate for the likely decline in availability of secondary sources. Therefore, consid­erable uncertainty about future uranium prices remains. In the long run, uranium prices will be capped by the possibility of reprocessing of spent fuel. Except in Japan, no new commercial reprocessing facilities have been built for decades. The existing quasi-commercially operating plants in France and the United Kingdom initially served military purposes and were adapted or rebuilt for spent fuel reprocessing in the 1960s and 1970s under fundamentally different conditions (e. g., exponential growth of nuclear power, perceived limited uranium availability, continued demands for mili­tary purposes) and expectations of future nuclear power development in which plutonium-fuelled fast breeder reactors played a central role. This future did not materialize, but reprocessing continued, often rationalized as an integral part of a nation’s nuclear waste management strategy or as a source for mixed oxide fuel (MOX) production and reuse in standard light water reactors (LWR). In any case, the expensive construction costs were quasi-stranded (sunk costs) and reprocessing services were offered interna­tionally at attractive terms. In short, the economics of reprocessing in the near future hinge upon substantially higher uranium prices (or the equiva­lent of the revival of fast breeder reactor technology). During the last decade several studies attempted to cut through the complexity of reproc­essing with its capital and operating cost depending on a mix of potential credits for recovered fissile materials, different waste volumes, interim storage requirements, high-level waste treatment and final disposal, and to determine break-even points with regard to uranium costs and once-through fuel cycles. For example, Bunn et al. (2003) concluded that ‘at a central reprocessing price of $1000/kg of heavy metal (kgHM), and with other central estimates for the key fuel cycle parameters, reprocessing and recy­cling plutonium in existing light-water reactors (LWRs) will be more expen­sive than direct disposal of spent fuel until the uranium price reaches over $360/kg of uranium metal.’ Likewise, the study The Future of Nuclear Power (Deutch and Moniz, 2003) concluded similarly, and that conclusion was repeated in the authors’ 2009 update (Deutch et al., 2009) which stated that ‘given the assumptions about uranium resource availability and new plant deployment rates, the cost of recycle is unfavorable compared to a once — through cycle, but the cost differential is small relative to the total cost of nuclear power generation’.

The crux of the matter of all things concerning the nuclear fuel cycle is contained in the last part of the conclusion: nuclear fuel cycle costs have been and will continue to be a small cost component in total nuclear gen­erating costs. The actual fuel costs per MWh are a function of the front-end costs, capacity factor and burn-up (number of MWh per unit of mass gener­ated from the fuel) and the overall spent fuel management strategy (once — through or reprocessing and reuse). A very recent study estimated the once-through fuel cycle cost for LWRs at $8.67/MWh or some 10% to 14% of total generating costs (Rothwell, 2010).

The cost components for spent fuel management, disposal and decom­missioning are accumulated in escrow funds (or equivalent schemes) as the plant operates and account for approximately 10% of total O&M costs (or approximately $1/MWh). However, these components can vary widely depending on reactor technology, regulatory requirements and the time frame over which these must be accumulated.

The lifetime fuel requirements (in terms of volume) of nuclear power plants are relatively small (compared with fossil generation) and so are the amounts of spent fuel and waste. But spent fuel is radioactive and must be kept isolated from the environment. Most countries require spent fuel to be stored at the plant site for an interim period until its radioactive inven­tory is greatly reduced and the fuel can eventually be transferred to a permanent repository outside the plant site. If spent fuel is accumulated over many years or the entire plant life, sufficient storage capacity must be provided.