Australia's uranium lobby is shameless. Michael Angwin from the (now defunct) Australian Uranium Association claimed that Australia "has enough reserves to be to uranium what Saudi Arabia is to oil".
Specious comparisons between Australian uranium and Saudi oil have also been made by former South Australia premier Mike Rann, pseudo-academics Ian Plimer and Haydon Manning, Access Economics, and Comrade Paul Howes from the Australian Workers Union.
But Australia's uranium export revenue in 2011 was 466 times lower than Saudi oil revenue in the same year − Australia would need to supply entire global uranium demand 31 times over to match Saudi oil revenue. The uranium industry accounts for 0.015 per cent of jobs in Australia, and in the 10 years from 2002-11 it accounted for just 0.29 per cent of national export revenue (with most of that revenue never coming anywhere near Australia because of the high level of foreign ownership).
The uranium industry hoped that the post-Fukushima spot price would rebound after it fell to $US50/pound ... but then it fell to $US40 ... and now it has fallen below $US30.
The uranium spot price fell to $US29/pound U3O8 on May 5 and has not budged since.
Not since mid-2005 has the price been so low. The price is less than one-half of the pre-Fukushima price, and less than one-quarter of the price at the peak of the 2007 bubble. Uranium Investing News notes that "the phrase 'uranium renaissance' has been uttered so often that it has begun to feel like a bad joke".
What's going on?
The uranium lobby has been arguing that plans to begin restarting reactors in Japan later this year (all of Japan's 48 reactors are currently shut-down in the wake of the Fukushima disaster) will lead to higher uranium prices. But as As FNArena notes, progress towards reactor restarts in Japan "has been glacial and anti-nuclear protest has been powerful".
Japan's uranium inventories probably amount to around 100 million pounds (45,400 tonnes) according to David Sadowski, a Raymond James analyst.
Sadowski added that many utilities around the world "are sitting on near-record piles" of uranium. It could take a decade or more before Japanese utilities exhaust existing inventories.
China is buying uranium − but is now sitting on stockpiles sufficient to meet current annual consumption eight times over. The uranium lobby hoped that the December 2013 end of a US-Russian agreement to downblend weapons uranium for use in power reactors would stimulate a price increase. But the spot price has fallen 17 per cent this year alone.
French state-controlled nuclear group Areva's first-quarter revenue from its uranium mining unit fell 63 per cent. The mining arm of Russia's state-controlled utility Rosatom has frozen uranium expansion projects in Russia and elsewhere (hence the Honeymoon mine in South Australia has been put into care-and-maintenance). Canadian giant Cameco has abandoned its earlier uranium production growth targets (and scaled back uranium exploration and development work in Australia).
In 2012 BHP Billiton cancelled its planned expansion of Olympic Dam in South Australia and disbanded its uranium division. Wannabe uranium miner Marathon Resources gave up on the uranium game last year, stating that the "risks were more likely to exceed rewards". Energy Resources of Australia is struggling with the political and economic fallout of a December 2013 leach tank collapse at the Ranger mine in the Northern Territory resulting in the spillage of 1.4 million tonnes of radioactive slurry; the collapse of a ventilation shaft a few weeks ago; and the revelations of a whistleblower published in the Mining Australia magazine on May 5.
Australian-based Paladin Energy operated two mines in Africa but production at one of those mines has been suspended and the company is at risk of going bankrupt. As Paladin Energy chief executive John Borshoff said last July, "the uranium industry is definitely in crisis".
A nuclear insider's view
Just about everyone in and around the uranium industry consoles themselves with the thought that uranium prices will have to rebound sooner or later to stimulate new production, which will be required even if global nuclear power capacity continues to stagnate. A contrary view comes from Steve Kidd, an independent consultant and economist with 17 years of work at the World Nuclear Association and its predecessor, the Uranium Institute.
Writing in the Nuclear Engineering International Magazine on May 6, Kidd states that "the case made by the uranium bulls is in reality full of holes" and he predicts "a long period of relatively low prices, in which uranium producers will find it hard to make a living".
Kidd argues that the replacement of inefficient gaseous diffusion enrichment plants with centrifuge enrichment plants is a "crucial" factor.
"Enrichment is now expected to remain cheap and abundant as centrifuge plants are modular and capacity can be expanded relatively easily to meet demand, so this substitution of enrichment for uranium will continue to be important," he writes. Huge global stockpiles of depleted uranium (over one million tonnes) represent "an attractive resource while there is overcapacity in enrichment and cheaper prices".
Kidd notes that despite all the hype about nuclear growth plans, uranium demand did not rise from 2003-10 as shutdowns of ageing reactors were balanced by the commissioning of new units (mostly in China). Yet uranium production increased by 50 per cent (mostly in Kazakhstan). Hence the oversupply in the world uranium market, lower prices and an upsurge in uranium inventory levels in the US, Europe and Japan.
Kidd states that most nuclear power growth to 2030 will be concentrated in China and Russia. But "uranium demand will almost certainly fall in the key markets in Western Europe and North America", and in Japan it will take a "long time to unwind the inventory accumulation". In short: "Those who believe in higher uranium prices take an over-optimistic demand scenario."
Kidd argues that we are entering a new era, where the uranium market is split into three:
– The Chinese will favour investing directly in mines to satisfy their requirements; not the established uranium market.
– The Russians will continue to be significant nuclear fuel exporters but their own market will remain essentially closed to outsiders.
– The established uranium producers will have the remainder of the market to satisfy and that will likely be declining in magnitude. In the US, the number of operating reactors will fall by 2030 and the overall European situation will be one of "gentle decline".
Kidd says the Chinese and Russian approach (and probably India, too) to bypass the conventional market means it could increasingly become "merely a sideshow".
Kidd predicts "a reversion to the long period of low (but relatively stable) uranium prices of the late 1980s and 1990s ... but at a higher level to reflect the greater level of production now, the escalation of mining costs and the movements in currency exchange rates".
He concludes that the outlook is not favourable for either current or prospective uranium producers: "Only those with low-cost operations will prosper. Others will struggle to stay in business and further mine closures ... are definitely on the horizon."
An independent inquiry is long overdue to objectively weigh the economic benefits of Australia's uranium industry against its effects on environmental and public health, safety and security − particularly in the shadow of Fukushima.
Jim Green is the national nuclear campaigner with Friends of the Earth and co-author of the 2013 report, 'Yellowcake Fever: Exposing the Uranium Industry's Economic Myths'.