Research Note no. 32 2004–05
Australia’s uranium after Kyoto
Greg Baker
Statistics Section
14 February 2005
With the coming into effect of the Kyoto protocol,1
the use of nuclear power to reduce greenhouse gas emissions has taken
greater prominence in debate. In this context, Australia’s large resources of uranium—the feedstock of nuclear
power—will become more important. In addition, the growing gap between
demand and supply of uranium is driving world prices higher, ultimately
to the advantage of Australia’s uranium miners.
This brief examines the issues of Australia’s uranium in the context of world supply and demand,
shows why world prices are rising and looks to the future of the uranium
industry in the environmental debate over greenhouse gas emissions.
Australia’s uranium
Uranium is a naturally occurring radioactive
element which is a mixture of several forms or isotopes of uranium.
Of these isotopes, uranium-235—referred to symbolically as 235U—is
capable of sustaining a nuclear chain reaction. This chain reaction
can be controlled to release large amounts of energy which can be used
to generate heat. The heat energy released is used to drive steam turbines
which in turn generate electricity. Although other elements are also
capable of sustaining chain reactions, uranium is the cheapest and most
abundant. Hence 235U is of importance as a fuel in the nuclear
reactors used to produce electricity in a number of countries worldwide.
Uranium ores are processed using acid
or alkaline leach technologies to recover uranium concentrates which
are bright yellow in colour and referred to as ‘yellowcake’. Yellowcake
is then heated to about 700°C to produce a dark grey-green powder containing
more than 98 per cent uranium oxide—U3O8—which is placed
in 200-litre steel drums for export.
In its natural state, 235U
does not form a high enough proportion for the uranium to be useful
as a fuel. This natural occurrence of about 0.7 per cent 235U
needs to be increased to as much as 4.0 per cent 235U. Uranium
producers in Australia do not attempt this process which needs highly specialised
and expensive equipment. This enrichment process is carried out
overseas using Australian-exported uranium. Eventually the 235U-enriched
uranium is used to manufacture fuel rods for nuclear power reactors
in countries prepared to sign nuclear safeguards agreements (see below).
Australia’s uranium reserves
Australia has the world’s largest resources of low-cost uranium
(recoverable at costs of less than US$40 per kilogram of uranium),
with approximately 39 per cent of world resources in this category.
It has 28 per cent of the world’s resources recoverable at less than
US$80 per kilogram of uranium. This makes Australia significant in this market.
Demand for uranium
Demand for Australia’s uranium
is ultimately a function of installed nuclear electricity capacity in
countries prepared to sign Australia’s nuclear safeguards policy. Worldwide there are currently
440 nuclear reactors generating electricity. Their installed capacity
is around 350 gigawatts energy which is equivalent to about eight
times the total installed capacity of all conventional electricity generation
plants in Australia. By the year 2020, it is expected that nuclear power
reactors operating worldwide will have an installed electricity generating
capacity of between 425 and 500 gigawatts energy.
For some time now, world requirements
for uranium have exceeded world production, with a proportion of requirements
being met from the conversion of highly enriched uranium from obsolete
military warheads. Additional supplies may eventually come from uranium
produced in the new states formed after the break up of the Soviet Union;
these have not previously been provided to the world market.
Graph 1 shows world production and consumption
of uranium since 1982.
Source: Australian Commodity Statistics
2004, ABARE, Tables 343 and 344.
Despite this obvious imbalance and the
reduction in stockpiles, world uranium prices have not risen until the
last few years. Low prices were due to the world uranium stockpile and
the uncertainty of the outcome of political decisions concerning the
use of military stockpiles, the de-commissioning of old warheads, and
the use of uranium from the states of the
ex–Soviet Union.
Graph 2 shows monthly average world
uranium spot prices since 1982. Because of the dominance of the USA in the world uranium market, these prices are quoted
as $US per pound of U3O8. Although Australia’s uranium
is sold under long-term contract rather than onto the spot market, these
spot prices do give an indication of the state of the world uranium
market in which future contracts will be written. It is clear from these
data that there has been a large increase in uranium spot prices in
the past few years. This increase in prices looks set to continue.
Source: Australian Commodity Statistics
2004, ABARE, Table 345.
Australian production and exports
Production of uranium in Australia makes up more than 20 per cent of world production.
Production is from three mines: Ranger in the Northern Territory and Olympic
Dam and Beverley in South Australia.
Australian production and exports of
uranium closely parallel one another. Graph 3 shows that current production
and exports are approaching 10 000 tonnes of uranium oxide per
year.
Source: Australian Commodity Statistics 2004, ABARE, Table 342 as revised following personal correspondence.
All production is exported because there
is no significant local demand for uranium oxide. Australia applies
conditions to the export of uranium under its nuclear safeguards policy.
This policy, which began in 1977, is intended to ensure that Australian
uranium is not used for, or diverted to, nuclear weapons programs. In
practical terms, this is based primarily on the buyer being a signatory
to the Nuclear Non-Proliferation Treaty. In addition, Australia requires buying countries to enter into a bilateral
agreement, thereby further ensuring among other things that the uranium
is covered by International Atomic Energy Agency safeguards throughout
its life; that Australian uranium is only transferred to third parties
with Australian consent; and that the uranium is kept physically secure.
Australia currently
has 18 bilateral safeguards agreements which cover 35 countries. Compliance
with Australia’s nuclear safeguards policy is monitored by the Australian
Safeguards and Non-Proliferation Office.
The future
The future of Australia’s uranium industry
will ultimately be the outcome of Australian and worldwide concerns
about the environmental health dangers of mining and using uranium,
of the need to store nuclear fission products for very long periods
of time and of the issues concerned with the de-commissioning of nuclear
electricity reactors at the end of their useful life. Environmental
concerns have led to the closure of nuclear electricity reactors in
several countries. Nonetheless, with concerns about the environmental
effects of carbon dioxide emissions from coal-fired electricity generation
and the uncertain future price of oil, there are considerable pressures
to increase the importance of uranium and nuclear electricity generation
in the future mix of energy sources.
-
The date of effect
of the Kyoto protocol
is 16 February 2005.
For copyright reasons some linked items are only available to
members of Parliament.
|
