TL: URANIUM DEMAND, SUPPLY and PRICES: 1991-2000 SO: Greenpeace International (GP) DT: 1990 Keywords: nuclear power uranium markets greenpeace reports gp / Source: A GREENPEACE REPORT Ciaran O'Faircheallaigh Greenpeace International Date: 1990 TABLE OF CONTENTS Foreword A Note on Units and Measures Abbreviations 1 Introduction and Summary of Findings 3 2 Predicting Uranium Supply and Demand 5 3 Uranium Demand, 1991-2000 7 4 Uranium Supply, 1991-2000 18 5 The Supply/Demand Balance and Uranium 25 Prices, 1991-2000 6 Conclusion 29 References 30 Appendix 1: WOCA Mines Producing in 31 Excess of 100 Tonnes U308 in 1988 Appendix 2: WOCA Uranium Projects which 35 could be in production during 1991-2000 FOREWORD This is a revised and updated version of a study (referred to below as the Draft Report) completed in August 1989. It takes account of recent changes in Britain's nuclear electricity industry, in uranium markets and prices, and in forecasts of nuclear generating capacity and uranium demand prepared by a number of institutions involved in the nuclear industry. It also takes advantage of the availability of substantial additional information on existing and proposed uranium projects in the United States, and deals with changes in the Uranium Institute's assumptions about the future relationship between nuclear generating capacity and uranium demand, assumptions used by the Draft Report in forecasting uranium demand during 1991-2000. These revisions do not materially alter the Draft Report's conclusions, but rather provide additional and more detailed support for them. Ciaran O'Faircheallaigh Brisbane, January 1990 A NOTE ON UNITS AND MEASURES A variety of units and measures are used in describing uranium production, demand, ore reserves, ore grades and prices. They are expressed either in terms of Uranium Oxide (U308) or Uranium (U), and in units of metric tonnes, short tonnes, kilograms or pounds. In this report, all figures for production, demand and ore reserves have been converted to metric tonnes. Uranium demand and consumption are almost always expressed in terms of Uranium (except in the United States), and this practice is adopted here. However, it is common usage to describe mine capacity, production, ore reserves, ore grades and prices in terms of Uranium Oxide. Consequently Chapter 4 and the Appendices express all volumes in tonnes of uranium oxide and ore grades in terms of per cent U308, while uranium prices are expressed in terms of dollars per pound U308. The supply data from Chapter 4 are converted to tonnes Uranium for the supply/demand analysis in Chapter 5. One tonne of Uranium Oxide is equivalent to approximately 0.84 tonnes Uranium. Nuclear power plant capacity is expressed as MWe or Megawatt-electric, and electricity generated by nuclear power plants is expressed as GWh or Gigawatt-hours. ABBREVIATIONS AAC Anglo American Corporation of South Africa Ltd E&MJ Engineering and Mining Journal ENUSA Empressa Nacional de Uranio SA ERA Energy Resources of Australia GWh Gigawatt-hour IAEA International Atomic Energy Agency KEPCO Korea Electric Power Company MWe Megawatt-electric OECD Organisation for Economic Cooperation and Development RTZ Rio Tinto-Zinc Corporation (now RTZ Ltd) TCFP Total Compagnie Francaise de Petroles TCM Total Compagnie Minere WOCA World Outside Centrally Planned Economies Area INTRODUCTION AND SUMMARY OF FINDINGS The purpose of this study is to estimate the balance between demand and supply of newly mined uranium for the world outside the centrally planned economies (WOCA) over the years 1991-2000 and, on this basis, to draw conclusions regarding likely trends in uranium prices during the coming decade. This information is then used to gauge the economic prospects for development of new uranium mining capacity in Australia between now and the end of the century. The analysis is confined to WOCA because the centrally planned countries will be self-sufficient in uranium at least until the end of the century (OECD/IAEA 1987, 43), and so will not generate demand for uranium produced elsewhere. The period 1991-2000 is chosen because it is during these years that any new projects would commence operations if a decision was taken now to expand Australia's uranium industry. Chapter 2 briefly discusses the problems involved in predicting future supply and demand of uranium. Chapter 3 reviews the nuclear power programmes of all WOCA countries which will generate nuclear power during the period under review, or which have stated their intention of doing so. On the basis of this review, an estimate is made of the Western World's uranium requirements, allowing for uranium obtained from reprocessing of spent nuclear fuel. Chapter 4 estimates supply of newly mined uranium from WOCA projects which are currently operating or which are scheduled to commence operations prior to 2000; exports from the centrally planned economies are then added to obtain an estimate of total supply. This part of the report draws on data relating to some 60 mines and prospective mines, reproduced on a project-by-project basis in Appendix 1 and 2. Chapter 5 combines the figures on uranium demand and supply with information on recent price trends to draw conclusions about the likely direction of future prices, and about the economic implications of developing additional uranium mining capacity in Australia. The report assumes that there will be no fundamental change in circumstances during 1991-2000 which will radically alter prospects for the nuclear power industry, either negatively (for example another accident on the scale of Chernobyl) or positively (for instance a shift towards nuclear power as a result of concern with the greenhouse effect). Events of the first kind are entirely unpredictable, while any shift in public sentiment towards nuclear power will have little effect on uranium demand during 1991-2000, because of the long lead times involved in planning, building and commissioning nuclear power stations (see below). The report takes care to make explicit its assumptions about each country's nuclear power programme and about the development of individual mining projects. This ensures that the reader can both assess the validity of these assumptions and, if circumstances change in relation to individual countries or projects, adjust the report's conclusions accordingly. PRINCIPAL FINDINGS The report estimates future nuclear power plant capacity at 302,000 MWe in 1995 and 310,000 MWe in 2000. These are slightly lower than other published forecasts for 1995, and significantly lower (by 7 to 9 per cent) than other forecasts for 2000. The major reasons for the discrepancies are that (i) Other forecasts do not take into account some recent developments, for example Italy's closure of all its nuclear power plants, decisions by a number of countries not to develop new capacity before 2000, and Britain's November 1989 decision to scrap plans for three new reactors in the late 1990s. (ii) They make assumptions about the progress of new reactor construction and licensing which are quite unrealistic in the light of historical experience. This estimate of nuclear plant capacity is used to calculate uranium demand for each year during 1991-2000. It is anticipated that uranium demand will grow from 39,500 tonnes Uranium (U) in 1991 to 43,600 tonnes U in 1998, declining very slightly to 43,400 tonnes U in 2000. Supply is expected to grow slowly from 38,000 tonnes U in 1991 to 41,100 in 1995, then to jump to nearly 46,500 tonnes U in 1997 as new projects come on stream in Canada and as output from existing Australian mines is expanded. It is forecast to decline to 44,200 in 2000 with the exhaustion of older mines, especially in Canada. These supply projections assume that some delays occur in the development of planned additional capacity, and that a number of producers under-utilise their production capability (see Chapter 4). Combining the estimates for supply and demand, the study predicts that demand will exceed supply by an average of about 1,700 tonnes U per annum during 1991-95. However, this shortfall can be covered by a reduction of only 5.7 per cent in the uranium stocks which will exist at that time. Such a reduction in stocks is unlikely to result in more than a modest increase in uranium prices from their current levels, which are the lowest in real terms since the birth of the civilian nuclear power industry; stocks fell by a larger percentage during 1985- 1988, yet over this period a significant decline occurred in uranium prices (see Chapter 5). Supply is expected to significantly exceed demand from 1996 to 1998 (by an average of 2,100 tonnes U per annum), and to slightly exceed demand in 1999 and 2000. This would result in an increase in uranium stocks of about 5 per cent between 1996 and 2000, exerting downward pressure on uranium prices and probably keeping them close to their current low levels in real terms. It is predicted that the uranium market will be almost exactly in balance over the decade as a whole. Development of even one small new uranium project in Australia (such as Koongarra or Kintyre) would mean that supply would significantly exceed demand, and as a result the possibility of even a modest recovery in prices would probably disappear. The addition of a large project such as Jabiluka would create substantial over-supply and result in a large build-up of stocks during the 1990s (by about 22 per cent), exerting strong downward pressure on prices, especially in the second half of the decade. This would not only threaten the economic viability of the new projects, but would also diminish returns from existing uranium mines to the national economy, to shareholders, and to Aboriginal landowners in the Northern Territory. PREDICTING URANIUM SUPPLY AND DEMAND It is very difficult to accurately predict future supply and demand for any mineral commodity. Demand depends on the rate and sectoral distribution of economic growth in consuming countries, on changing intensities of use for the mineral across a range of applications, and on rates of substitution between different minerals which can perform a single function. Predicting supply usually requires information regarding the investment and production plans of a large number of mineral suppliers, and regarding the likely behaviour of firms which recover scrap metal. Where one mineral is produced as a co-product or by-product of another, as frequently occurs (1), it is necessary to consider future supply of the other mineral as well. In theory, it should be considerably easier to predict supply and demand for uranium than for most other minerals. A very high proportion of demand is accounted for by a single end use, generation of electric power, whereas many other minerals (e.g. copper, aluminium, zinc and nickel) have scores or hundreds of uses. There is no alternative to uranium as a fuel in nuclear power reactors, so the possibility of substitution need not be considered, and there is no 'scrap metal' industry for uranium. In addition, planning, construction and commissioning of nuclear power stations requires a considerable period of time (at least six years and up to 15 years), and so planned additions to capacity are usually known well in advance. In combination, these factors should make it easier to accurately predict future uranium requirements, at least in the short term (e.g. over a decade). On the supply side, ownership of mine production and of uranium resources is highly concentrated, which should simplify the task of gauging future patterns of production and investment; for example, in 1982 the six leading corporations involved in the uranium industry (RTZ, ERA, Denison, Cogema, Kerr McKee and AAC) accounted for 61 per cent of total mine output. And though there are some exceptions (2), uranium is not generally mined in combination with other minerals. In fact, the magnitude of errors in predictions of both demand and supply have been greater for uranium than for other minerals (3), and both have been systematically and substantially overestimated. A number of factors help to explain this situation. First, uranium's dependence on a single end use means that unexpected changes in nuclear power programmes can have a dramatic impact on demand; commodities with a variety of end uses are much less likely to be affected by unexpected developments in relation to any one of them, and indeed errors in forecasting in relation to one end use may cancel out those in relation to another. Unexpected changes in nuclear power programmes have in fact occurred during recent decades, and especially over the last 15 years. Second, supply and demand forecasts have usually been carried out by agencies strongly committed to the growth of nuclear power and/or uranium mining (e.g. the Organisation for Economic Cooperation and Development's Nuclear Energy Agency and the International Atomic Energy Agency [OECD/IAEA], the Uranium Institute, firms engaged in marketing uranium and nuclear technology such as NUKEM and NUEXCO), and demand forecasts have usually been based on data supplied by governments strongly committed to nuclear power programmes. This helps to explain both the fact that forecasts of supply and demand have been systematically overestimated, and the fact that the tendency to overestimate demand persisted long after it became apparent that nuclear power programmes were running into difficulties in many countries (4). However, it should be noted that agencies with strong links to uranium mining (the Uranium Institute, Mining Journal Ltd) have a better track record in forecasting supply and demand than those involved in the nuclear power industry. So, for example, Mining Journal Ltd predicted in 1978 that uranium consumption would be 65,000 tonnes in 1985, as opposed to the OECD/IAEAs 'most probable' estimate of 92,000 tonnes-, actual consumption in 1985 was 40,000 tonnes (O'Faircheallaigh 1987, 30). In 1986 the Uranium Institute predicted that consumption would be 49,000 tonnes U308 in 2000; the OECD's 1986 estimate was 62,000, but two years later it had already revised this downwards to 52,400. This situation may reflect the fact that mining interests have a great deal to lose from over-estimation of uranium demand; indeed some (particularly in the US) have already incurred heavy losses on the basis of over-optimistic projections in the 1970s (5). Those involved in the nuclear power industry, on the other hand, have much to gain from emphasising the potential importance of nuclear power. Some may also stand to gain from an over-supply of uranium; power utilities are currently paying the lowest prices ever for spot market uranium purchases. This discussion raises an important point. Predicting uranium supply and demand has been as much a political exercise as a technical or economic one, 'political' both in terms of conflicting positions in relation to the desirability of developing nuclear power, and in terms of conflicting perspectives and interests within the uranium mining and nuclear power industries. This situation is facilitated by the fact that predictions of demand, in particular, require assumptions about a number of key variables which are largely matters for subjective judgement, for example timetables for nuclear plant construction and licensing, government support for nuclear power programmes, and operating characteristics of nuclear power plants. Nevertheless the task of estimating uranium demand in the near term is less complex today than at any time in the last thirty years. Many WOCA countries have completed development of their nuclear power programmes for the time being, or will have done so by 1991 or 1992 (see Chapter 3), though France and Japan are notable exceptions. Development of additional reactors may of course be initiated in the near future, but given the long lead times involved in planning, licensing, building and commissioning nuclear power plants, they will not have an impact on uranium demand before the end of the 1990s. On the supply side, a substantial proportion of output is accounted for by a small number of producers who are well established, possess substantial reserves, and have assured markets for a large part of their output through long-term contracts and/or customer equity. And a substantial part of any additions to capacity over the next decade will come from just a handful of new projects and planned expansions (see Chapter 4). NOTES 1 Thus, for example, two or more of zinc, lead, copper and silver are often found in association; copper is also mined with nickel, gold and molybdenum. 2 South Africa produces uranium as a by-product of gold, and in Australia uranium is extracted with copper and gold at Roxby Downs. 3 See, for example, Radetzki 1981, 52-53; Owen 1983; see also the comments by Ian Duncan of Western Mining Corporation at the Uranium Institute's 13th Annual Symposium, reported in Mining Journal, 30 September 1988, 262. Philip Crowson has argued that future forecasts of uranium demand have not been more optimistic than those for other metals. However his comparison is based on Uranium Institute forecasts alone and these, as noted later in the text, have been considerably less optimistic than others. In addition, his data does indicate that demand forecasts for major metals such as copper, lead and zinc were in fact more realistic than those for uranium (Crowson 1986, 353 and Table 1, 353). 4 Note, for example, the OECD/IAEA's serious overestimation of uranium demand as late as 1986 (see text below). 5 A number of major US producers, for example Kerr-McGee, have written off their investments in uranium mining during recent years. URANIUM DEMAND, 1991-2000 The first step in predicting uranium demand is to estimate WOCA:s nuclear generating capacity for each year during 1991-2000. This is done by reviewing the nuclear power programme of each country individually and, where necessary, making assumptions about when planned additional capacity will come on stream. These assumptions are required because official start-up dates for reactors are frequently unrealistic, ignoring the delays which often accompany nuclear development programmes (1). EUROPE BELGIUM At the end of 1988 Belgium had 7 nuclear reactors in operation at two sites, Doel and Tihange, with capacity of 5,334 MWe. They generated 43,101 GWh of electricity in 1988 (65.6 per cent of total electricity production) at an average capacity factor of 86 per cent. In December 1988 the Belgium government shelved plans indefinitely for an eighth reactor, and it now seems that another reactor will not be completed before the end of the century. Since none of the existing reactors are due for de-commissioning before 2000, it is assumed that capacity will remain at its current level during 1991-2000. Forecast: 5,334 MWe during 1991-2000 FINLAND Finland had four nuclear reactors in operation in 1988, with a total capacity of 2,300 MWe; they generated 19,276 GWh of electricity, operating at an average capacity factor of 92 per cent. Fuel for two of Finland's reactors (capacity 880 MWe) is supplied by the Soviet Union; the OECD excludes these reactors from its estimates of WOCA capacity in calculating uranium requirements, and this seems appropriate. Finland's government has indefinitely deferred consideration of a fifth nuclear reactor, and construction is unlikely to commence in the near future. Forecast: 1,420 MWe during 1991-2000. FRANCE By the end of 1988 France had 54 reactors in commercial operation at 18 locations, including the Superphenix Fast Breeder Reactor. They had a total capacity of 52,298 MWe, and in 1988 they operated at an average capacity factor of 61 per cent and produced 274,862 GWh of electricity, or 75 per cent of France's total. Construction is proceeding on another eight reactors, with a combined capacity of 10,770 MWe; these are due to come on line during 1989-1993. However, the French state generating authority, Electricite de France (EDF), has substantial surplus generating capacity and is significantly underutilising its existing power plants. It seems likely that EDF will slow construction on the new plants so as to avoid an even larger surplus, and it is consequently assumed that they will come on stream at the rate of one reactor per year over the period 1989-1996, rather than during 1989-1993. It is possible that the further liberalisation of trade barriers within the European Community in 1992 will allow EDF to sell more electricity to other European countries, but any such development is unlikely to be sufficiently dramatic to result in a faster construction schedule given the low current level of capacity utilisation. No orders have been placed for nuclear reactors apart from the eight now under construction, and so it appears unlikely that further plants will be completed before 2000. Two of France's reactors commenced operations in 1967 (Chinon A3 and Chooz A) and another in 1969 (St Laurent A1), and these will be decommissioned in the late 1990s. Details regarding the timing of decommissioning are not available, and its impact on capacity has consequently not been taken into account. Their combined capacity is 1,055 MWe. Assuming that current capacity remains in place, that one new reactor comes on stream each year between 1989 and 1996, and that none are completed between 1997 and 2000, France's capacity is estimated as follows: Forecast (MWe): 1991 56,228 1992 57,538 1993 58,993 1994 60,303 1995 61,613 1996-2000 63,068 ITALY Italy had four commercial reactors in operation by 1988, with a combined capacity of 1,433 MWe, and two others under construction. In September 1988 the Italian government decided to abandon the country's nuclear power programme. Three of the existing reactors are being dismantled and the fourth mothballed; the two power stations under construction are being converted to oil- and gas-fired plants. As a result, Italy will have no nuclear power generating capacity during 1991-2000. The state utility, ENEL, has a stockpile of uranium which it will presumably attempt to dispose of. Forecast: No capacity during 1991-2000 NETHERLANDS The Netherlands has two nuclear reactors in operation, with a combined capacity of 535 MWe; in 1988 they accounted for 5.3 per cent of total electricity supply. The Dutch government continues to defer a decision on construction of new nuclear reactors, and the country's utilities are planning to use natural gas in new power stations. It thus seems very likely that, assuming existing plants remain in operation, Holland's nuclear generating capacity will remain unchanged for the remainder of the century. Forecast: 535 MWe during 1991-2000 SPAIN Spain had 10 commercial reactors in operation by end 1988, located at 7 sites and with a combined capacity of 7,630 MWe; they generated 50,430 GWh of electricity, or 36.1 per cent of the total, at an average capacity factor of 82 per cent (for the reactors which operated throughout 1988). Considerable uncertainty surrounds the future of Spain's nuclear power programme. A nuclear moratorium was established under the National Energy Plan for 1983-1992, and construction has been halted on four reactors which, if completed, would have a total capacity of MWe 3,750 (Valdecabelleros 1 and 2, Lemoniz 1 and 2). It is not yet clear whether this will be continued under the subsequent plan. NUKEM reports that rapid growth in Spain's electricity demand (3.4% per annum since 1983) has increased the likelihood that construction will be resumed on the mothballed Valdecabelleros 1 and 2 reactors (NUKEM Market Report, 4/1989), but it appears that the two Lemoniz reactors will not be completed for political reasons. The Spanish government is not expected to take a decision on the matter before 1991, and at present it is impossible to predict what the outcome will be. If a decision is made in 1991 to resume construction on Valdecabelleros 1 and 2, they would probably be completed by 1995. Thus it can be assumed that capacity will remain at its current level during 1991/1995, and may increase to 9580 during 1996-2000. Forecast (MWe): 1991-1995 7,630 1996-2000 7,630 without Valdecabellaros 9,580 with Valdecabellaros SWEDEN Sweden currently has 12 commercial reactors, all of which were operational by 1985. They have a capacity of MWe 9,640, and in 1988 generated GWh 69,405 of electricity, or close to 50 per cent of the country's total supply, operating at an average capacity factor of 79 per cent. Sweden has decided to shut down all nuclear plants by 2010, but it is not yet clear when the various reactors will be decommissioned. The Swedish government apparently intends to close some of them well in advance of that date, and in 1988 announced its intention of closing the Barseback 1 and Ringhals 1 reactors in 1995 and 1996. The Green Party, which gained 20 seats in the 349-seat parliament in the September 1988 elections, is pushing for a much more rapid phasing out of nuclear power. In the absence of more detailed information on planned decommissioning, it can only be assumed that, with the exception of Barseback 1 and Ringhals, existing capacity will continue to operate until 2000. This allows the following forecast: Forecast (MWe): 1991-1994 9,640 MWe 1995 9,040 MWe 1996-2000 8,290 MWe SWITZERLAND Switzerland has five commercial reactors with a total capacity of 2,886 MWe. They generated 22,689 GWh of electricity in 1988, operating at an average capacity of 84 per cent. In 1988 the Swiss government cancelled the only other reactor for which planning had commenced, in response to public pressure in the wake of the Chernobyl accident, and a de facto moratorium on new nuclear reactor construction now exists. Switzerland's parliament has voted to keep the nuclear power option open in the longer term, but given the length of time required for plant approval and construction it is certain that no new reactors will be in operation in Switzerland by 2000. It is consequently assumed that Switzerland will continue to operate its existing capacity throughout 1991-2000. Forecast: 2,886 MWe during 1991-2000 UNITED KINGDOM The United Kingdom currently has 26 commercial reactors operating at 16 sites; in 1988 they accounted for 19.3 per cent of total electricity generated and operated at an average capacity of 51 per cent. Another reactor, Torness Point 2, is due for completion in 1989, and this will bring total capacity to 12,300 MWe. Sizewell B (1,100 MWe) is due to come on line in 1994. The Draft Report (O'Faircheallaigh 1989) also incorporated in its estimate of future capacity a planned reactor, Hinkley Point C (assumed to come on stream in 1998); it took the view that two other planned reactors, Wylfa 3 and Sizewell C, were unlikely to be operational by 2000, and so they were not included in the capacity forecast. In November 1989, the Thatcher government announced that while Sizewell B would be completed by 1994, plans for the other three reactors would be scrapped. This decision resulted partly from the government's failure to persuade British financial institutions that nuclear power plants should be included in the privatisation of the country's electricity industry; the institutions took the view that the cost of decommissioning power stations and disposing of nuclear waste were so high as to constitute excessive financial risks. These developments are regarded as having dealt a serious blow to future prospects for Britain's nuclear power industry, and they will result in a significant decline in nuclear generating capacity in the late 1990s (2). A number of British reactors are well advanced in years, and will be decommissioned before 2000. Assuming a 35-year life, Calder Hall would be due for decommissioning in 1991, Chapel Cross in 1993, Berkeley and Bradwell in 1997, Hunterston A in 1999 and Dungeness A, Hinkley Point 1 and 2, and Trawsfynydd in 2000. It is now reported that some of these plants may in fact be closed in the near future because they are no longer economic to run (see, for example, NUKEM Special Report, 5/1989). However, details of any early closures have not been announced, and so it is assumed that they will continue in operation until the dates indicated above. If they do not, this would of course reduce generating capacity during the mid and late 1990s. Given these assumptions regarding new reactors and decommissionings, the United Kingdom's forecast capacity is as follows: Forecast (MWe): 1991 12,100 1996 13,002 1992 12,100 1997 12,480 1993 11,902 1998 12,480 1994 13,002 1999 12,180 1995 13,002 2000 10,846 WEST GERMANY By the end of 1988, 22 nuclear reactors had commenced operations in West Germany, with a total capacity of 22,579 MWe; during 1988, reactors operated at a capacity factor of 74 per cent, and generated 145,215 GWh of electricity or 34 per cent of West Germany's total. Three reactors have been shut down due to political action by anti-nuclear groups, two of them indefinitely (Mulheim-Karlich and THTR 300) and the other temporarily (Biblis A). Political action has also prevented the commissioning of the Kalkar Fast Breeder Reactor, which is now scheduled to come on stream in 1990. Apart from Kalkar, no other reactors are completed, awaiting construction or under order. Assuming that no other plants are closed by political action and that Biblis A and Kalkar are operational by end 1990, West Germany's capacity should average 21,300 MWe during 1991-2000. Forecast: 21,300 MWe during 1991-2000 YUGOSLAVIA Yugoslavia has only one commercial reactor, which has a capacity of 664 MWe and operated with a 71 per cent capacity in 1988. The country has placed a moratorium on construction of additional reactors before 2000. Forecast: 664 MWe during 1991-2000 FAR EAST INDIA India operates six commercial reactors with a combined capacity of 1,138 MWe; in 1988 they produced 6,063 GWh of electricity at an average capacity of 52 per cent. It is currently developing or planning a further ten plants with a combined capacity of 2,760 MWe; four of these are under construction, the remainder are in the planning or site development stage. It also intends to obtain two 1,000-MWe Soviet reactors on a turnkey basis, due to come on stream in 1996 or 1997; however, the Soviet Union will provide the entire fuel supply for these reactors, and this capacity need not be considered in estimating WOCA uranium requirements. The major issues in estimating India's future capacity involve the degree to which plants under construction come on line as scheduled and whether planned reactors actually materialise. For example, the Kaprapar 1 and 2 reactors, due to come on stream in 1990 and 1991, were only 22 and 17 per cent completed by end 1988. Four of the six planned reactors do not yet have completion dates. India has encountered major technical problems in its nuclear power and associated programmes (e.g. manufacture of heavy water), and it seems certain that development of nuclear power will lag significantly behind plan. It is assumed that the Narora 1 reactor (completed) and Narora 2 reactor (80 per cent complete) will be operational by 1991; that Kaprapar 1 starts operating in 1992 and Kaprapar 2 in 1993; that Kaiga 1 and 2 start up in 1997 and 1998 (two years behind their current planned start-up); and that the remaining reactors, which do not yet have completion dates, come on stream after 2000. This gives the following capacity: Forecast (MWe): 1991 1,578 1996 2,238 1992 1,798 1997 2,458 1993 2,018 1998 2,678 1994 2,238 1999 2,678 1995 2,238 2000 2,678 JAPAN Japan currently operates 36 nuclear reactors at 15 sites, with a capacity of 26,860 MWE; only one of these, Tokai (133 MWe), commenced operations prior to 1970, and it is due to be decommissioned after 1995. Japan plans to continue expansion of its nuclear programme. At the end of 1988 reactors under construction or approved for construction were scheduled to add a further 15,565 MWe of capacity by 1997, and planned reactors a further 11,170 MWe. However, plans for nuclear power development have been delayed and/or downgraded in the past (see, for example, Mining Annual Review, 1984, 85), and it is not at all certain that this capacity will actually be completed as predicted (for details of official schedules, see NUEXCO, Annual Review 1988, 56-57). Two reactors are complete and scheduled to come on line in 1989, Shimane 2 (780 MWe) and Tomare 1 (550 MWe), while two others are 90% complete and planned to start operating in 1990 (Kariwa 2 and 5). It can thus be assumed that by 1991 40 reactors with a capacity 30,280 MWe will be on line. Nine of the planned reactors have not yet received authorization for development planning (yet alone construction) and, given the lead times involved in planning, licensing, construction and commissioning, it is very unlikely that they will operate prior to 2000. (They are officially referred to as coming on line 'after' various dates in the late 1990s). The real difficulty lies in gauging when the remaining 15 reactors will be commissioned. The official start-up dates for some are clearly unrealistic, for example Noto 1, scheduled for March 1993, which has yet to receive construction approval; and Hamaoka, scheduled for September 1993, where construction has yet to start. More generally, though widespread support for nuclear power exists in Japan, local protests have become more common during recent years, and licensing of new reactor sites has become more difficult, with the result that delays may occur in bringing on some facilities (for further details see Hallam 1988, 31). Delays may also occur for a variety of other reasons. It is assumed here that Hamaoka and Noto 1 will actually start generating in 1995 and 1996 respectively, and that the remaining reactors will commence production a year later than their scheduled start where they have construction approval, and two years later where they have yet to obtain approval. These assumptions do not appear overpessimistic, given recent experience in Japan itself and in other countries. They result in the following capacity figures: Forecast (MWe): 1991 30,280 1996 38,121 1992 31,951 1997 39,546 1993 33,352 1998 42,876 1994 35,518 1999 42,876 1995 37,608 2000 43,660 PHILIPPINES The Philippines has constructed only one nuclear reactor, which has now been mothballed after a 1986 decision by the Philippines government that it would never operate. Thus no nuclear generating capacity will exist during 1991-2000. Fuel assemblies held at this plant will be sold at some stage in the future. REPUBLIC OF KOREA The Republic of Korea had 8 commercial reactors in operation at the end of 1988, with a capacity of 6,323 MWe; they generated 40,010 GWh of electricity at an average capacity factor of 73 per cent, accounting for 46.9 per cent of total electricity production. A ninth unit is due for commissioning in 1989 (Uljin 2, 943MWe). Contracts have been awarded for two others (Yongkwang 3 and 4, joint capacity 1,886 MWe), but construction has yet to commence; they are tentatively scheduled to come on stream in 1995 and 1996. A further three reactors are planned, with a joint capacity of about 2,800 MWe; given the lead time involved, it can be assumed that they will not operate before 2000. Assuming that Yogkwang comes on stream as planned, capacity is: Forecast(MWe): 1991-94 7,266 1995 8,209 1996-2000 9,152 TAIWAN Taiwan currently operates six commercial reactors, with a total capacity of 4,884 MWe; they generated 30,951 GWh of power in 1988, about 50 per cent of Taiwan's total, operating at an average capacity factor of 68 per cent. In 1985 Taiwan's government suspended plans for two further reactors, to date it has given no indication that they will be reactivated, and additional coal-fired and natural gas plants are being constructed. It now seems unlikely that any additional plants will be on line by 2000, and so it is assumed that Taiwan's reactor capacity will remain unchanged during 1991-2000. Forecast: 4,884 MWe during 1990-2000 LATIN AMERICA ARGENTINA Argentina has two operating reactors, with a joint capacity of 935 MWe. They produced 5,355 GWh of electricity in 1988. Both have had major technical problems and operated well below capacity. A third unit (Athuca 2) is under construction and was scheduled for start-up in late 1993, but development has been held up by financial problems. More recently, the government of President Alfonsin has cancelled all construction of reactors planned by the military government. It consequently appears that Argentina's capacity will be limited to the currently operating reactors until 2000. Forecast: 935 MWe during 1991-2000 BRAZIL Brazil has only one operating commercial reactor, Angra 1, with a capacity of 626 MWe. It encountered major delays before entering commercial production in 1984, and has had serious technical problems which led to its closure for 16 months to October 1988. Two other reactors are under construction. Building of Angra 2 has been slowed down through lack of funds; it is scheduled for completion in 1992, but is now unlikely to be completed by then. 1994 would appear to be a more realistic date for commercial operation. Angra 3 is about 10 per cent complete; it is officially due for completion in the mid 1990s, but it is now uncertain that it will ever be finished due to shortage of funds, and it is consequently not included in the capacity forecast. Forecast (MWe): 1991-1993 626 1994-2000 1,700 MEXICO Mexico's first commercial reactor, Laguna Verde 1, comes on stream in late 1989, with a capacity of 675 MWe; construction commenced in 1972. A second reactor is about 60 per cent complete and due to start operations in mid 1992. Mexico's financial problems are reportedly threatening this project; it is assumed here that it will be completed but, given the delays incurred by Laguna Verde 1, it seems likely that start-up will not occur before 1995. Forecast (MWe): 1991-1994 675 1995-2000 1,350 NORTH AMERICA CANADA In 1988 Canada had 18 commercial reactors in operation at 4 sites, all but two operated by Ontario Hydro. They had a total capacity of 11,350 MWe, and produced 85,634 GWh at an average capacity factor of 77 per cent. Four other reactors are under construction, all at the same site, Darlington; they are between 50 and 98 per cent complete, and are scheduled to commence operations between 1989 and 1992, with a combined capacity of 3,524 MWe. The only other planned reactor is Point Lepreau 2 (900 MWe) in New Brunswick; construction has not started, nor has there been any indication of when it might. Since the Ontario government has decided not to commit to further nuclear power development for the time being, it can consequently be assumed that no capacity expansion will occur between completion of Darlington and the end of the century. If the Darlington reactors are completed as scheduled, this would result in the following capacity: Forecast (MWe): 1991 13,112 1992 13,993 1993-2000 14,874 UNITED STATES The United States has the largest nuclear power generating capacity in the world, 110 reactors with a combined capacity of 96,500 MWe at the end of 1988. During 1988 nuclear plants produced 529,000 GWh of electricity, or 20 per cent of the total. Another reactor, South Texas 2 (1,250 MWe), which received a low power licence in 1988, will begin commercial operation during 1989. Five reactors remain in active construction; they have a combined capacity of 5,632, and are scheduled to come on line by mid 1992. In addition, two reactors have been completed (Shoreham and Seabrook) and another seven partially completed, but all nine have been deferred indefinitely due to either political or financial problems, as have the only two reactors currently under order. NUEXCO's 1988 Annual Review (p.78) states that 'it is highly unlikely that any new nuclear orders will be placed before the end of the century', which indicates that once current construction is completed (i.e. about 1992) further capacity increases are unlikely to occur before 2010. Indeed, capacity will decline somewhat as older units are decommissioned during the 1990s, but relevant details are not available. In addition, at least one nuclear power station (Rancho Seco) will have been closed down as a result of a public referendum. The five plants under active construction may be subject to delays or even cancellation. Assuming they are not, capacity is forecast as follows (no account is taken of decommissionings or closures of operating reactors): Forecast (MWe): 1991 103,055 1992-2000 105,382 AFRICA SOUTH AFRICA South Africa has two commercial reactors in operation at the Koeberg site, with a combined capacity of 1,800 MWe met. South Africa apparently has no plans to develop further nuclear capacity before 2000. Forecast: 1,800 MWe during 1991-2000 CAPACITY FORECAST Table 1 (omitted here) draws together the figures for individual countries to calculate a forecast of total WOCA nuclear power generating capacity during 1991-2000. It indicates that capacity will grow from 281,948 MWe in 1991 to 310,338 MWe in 2000, an increase of 10.1 per cent or an average annual increase of just over 1.1 per cent. How does this compare with other forecasts of capacity? Table 2 (omitted here) presents forecasts by the QECD/IAEA (March 1988 and late 1988), NUKEM (April and May 1989), the Uranium Institute (July 1989), and NUEXCO (July 1988) for 2000 only. All three estimate capacity at about 340,000 MWe in 2000, significantly higher than my own estimate; however it should be noted that the growth indicated by their forecasts is itself far from spectacular (1.8 per cent per annum in the OECD/IAEA:s case). The discrepancy in forecasts is larger in the second half of the period, with the figures for 2000 diverging by about 20,000 - 30,000 MWe, whereas the largest divergence in 1995 is 10,000 MWe. What explains this discrepancy in forecasts? First and most importantly, the other forecasts assume that the official schedule for new capacity in Japan will be met, and in particular that reactors which have yet to receive approval for development planning will become operational in the period 1995- 2000. Thus both the OECD/IAEA and NUKEM forecasts of Japan's capacity are some 10,000 MWe greater than my own, which accounts for a third of the total difference. For reasons already explained, it is very clear that Japan's official schedule will not in fact be met. To assume that it will gives rise to exactly the sort of over-estimation of future capacity which was so characteristic of the 1970s and 1980s. Such overestimation can no longer occur in relation to countries where nuclear power programmes have reached a plateau; my estimates for the United States, the United Kingdom, West Germany and Canada, for example, are almost identical to the OECD'S, NUEXCO's and the Uranium Institute's (3). Second, the other forecasts assume that the nuclear power programmes of a number of developing countries (for example India, Argentina, and Brazil) will also proceed according to official schedules. Given the problems these countries have had with their programmes to date, this assumption appears to be even less warranted than in the case of Japan. Third, some of the forecasts do not take into account (because they precede) recent policy announcements which will reduce future capacity. For example, Italy's closure of its reactors is not taken into account; it is assumed that a number of countries (for example Belgium, Switzerland and Taiwan) will add to capacity in the late 1990s when it now seems that they will not; and no account is taken of the early closure of Swedish reactors. None of the forecasts take account of the recent developments in Britain's nuclear industry. It should be noted that the later estimates by the OECD/IAEA and NUKEM have moved significantly closer to my own. Between March 1988 and end 1988, the OECD/IAEKs forecast for 1995 fell from 312,600 to 306,932 MWe, compared to my figure of 301,904 MWe, while NUKEM's estimate for 1995 fell from 311,300 to 307,400 MWe between April and December 1989. The OECD's figure for 2000 fell from 341,800 to 332,852 MWe, NUKEM's from 342,900 to 336,600 MWe; this compares with my figure of 310,338 MWe. In my view, these downward revisions provide substantial support for the validity of the capacity forecast developed in this study. DEMAND FOR URANIUM Three factors have to be considered when calculating the demand for uranium which will be created by a given level of nuclear electricity generating capacity. The first involves the proportion of installed or nominal capacity which is actually utilised during the relevant period, referred to as the 'capacity factor'. During recent years this has varied very widely from plant to plant and country to country, within a range of about 50 per cent to close to 90 per cent. The second relates to the operating characteristics of nuclear reactors, whicdetermines how much enriched uranium is needed to support a given 'capacity factor'. The third involves the level of uranium in the discarded product from uranium enrichment, the 'tails assay'. This determines the volume of natural uranium which is required to produce a given amount of enriched uranium used in reactor fuel; the higher the tails assay, the larger the volume of concentrate which is required and so the higher the forecast of future uranium demand. All three factors are subject to considerable uncertainty, and consequently forecasts of uranium demand can vary widely even when there is agreement on future nuclear generating capacity. For example, in 1988 both the OECD/IAEA and NUEXCO forecast nuclear generating capacity at 341,000 MWe in 2000, but the OECD translated this into a requirement for 52,400 tonnes U, while NUEXCO translated it into a requirement for 57,845 tonnes U (OECD/IAEA 1988a, Tables 11 and 12; NUEXCO 1988, Tables 1 and 2). A measure of the overall result of the assumptions made regarding the three factors mentioned above is provided by calculating the uranium said to be required to fuel, on average, one MWe of installed capacity (referred to here as the 'conversion factor'). The higher this figure, the higher the level of uranium demand. In recent years, NUEXCO has used a figure of 0.20 for 1988 and 0. 17 for 2000, NUKEM a figure of between 0.16 and 0.17 for the 1990s, the OECD/IAEA a range of 0.149 - 0.156 for the period 1991-2000, and the Uranium Institute a figure of 0.14 for 1995 and 0.13 in 2000 (allowing for reprocessing of spent reactor fuel)(4). The Draft Report used a 'conversion factor' of 0.14 in converting estimated generating capacity to uranium demand, because the Uranium Institute has in the past been less prone to overestimate demand and because its figure was already adjusted to take account of spent fuel reprocessing. However, in its most recent supply and demand forecast (Uranium Institute, 1989), the Uranium Institute's conversion factor increased significantly. Allowing for the fact that the Institute no longer takes account of spent fuel reprocessing in calculating demand, the figure for 1995 has increased from 0.14 to 0.15; the average for the period 1991-2000 is also now 0.15 (5). This change has a significant impact on projected uranium demand. For example, if the higher figure were applied to the capacity estimates calculated in the Draft Report, estimated uranium demand would rise by a total of 30,074 tonnes during 1991-2000, or by 3,074 tonnes a year. Why has the Uranium Institute changed its assumptions, and are its reasons valid? The change is not discussed explicitly in the 1989 report, and it is necessary to examine its assumptions regarding capacity factors, operating characteristics and tails assay in order to assess the validity of the revised figure. However, this analysis can be conducted in general terms only, since the data presented by the Institute does not allow an estimation of the relative weights of each of these assumptions. 'First, the Institute has assumed that capacity factors will increase very significantly for a number of major nuclear power countries during the 1990s, and this would of course have a positive impact on the 'conversion factor'. For example France's capacity factor, which ranged between 57.2 per cent and 62.2 per cent during 1984-88, is assumed to increase to 70 per cent in 1990 and to remain at that level. West Germany's capacity factor, 74 per cent in 1988, is expected to be 85 in 1990 and for the rest of the decade. The figure for the United Kingdom is expected to rise from 51 per cent in 1988 to 65 per cent in 1990 and to remain at that level to 2000, and that for the United States to increase from between 55.7 per cent and 62.3 per cent during 1984-88 to 65 per cent in 1990 and 1995 and 70 per cent in 2000. Japan's capacity utilisation is predicted to increase from 70.4 per cent in 1988 to 75 per cent in 1990, 80 per cent in 1995 and 90 per cent in 2000. (Capacity factors are obtained from Uranium Institute 1989, 17, 42; NUEXCO, 1988 Annual Review; and Nucleonics Week, 11 January 1990). The Uranium Institute offers no explanation for these increases (1989, 17), and it is consequently not possible to assess its estimates in detail. However, two points should be made. First, it seems most unlikely that increases of the magnitude predicted for some countries can actually be achieved between 1988 and 1990 (i.e. from about 60 per cent to 70 per cent for France, from 74 to 85 per cent for West Germany, from 5 1 per cent to 6 5 per cent for the United Kingdom). Thus, even if the trend is towards higher capacity factors, it is not likely to be as dramatic or show itself as quickly as the Institute predicts. Second, while it is certainly possible to identify factors which would favour greater capacity utilisation in the longer term, it is also possible to identify factors which are likely to operate in the other direction. In the first category, changes to European Community regulations scheduled for 1992 may make it easier for France to export electricity, and so to utilise its nuclear generating capacity more fully, while in other cases recently commissioned plants may achieve higher utilisation levels as 'teething problems' are ironed out. However, the stricter enforcement of safety and environmental regulations which has followed the Chernobyl accident are likely to have the opposite effect, leading to more frequent and protracted shut-downs and so to lower capacity utilisation. In addition, as the 1990s progress, the proportion of older plants in the 'stock' of nuclear power stations will increase, and this is likely to result in more maintenance work with a consequent increase in shut-downs. In combination, these points indicate that the Uranium Institute is being too optimistic regarding trends in capacity utilisation during 1991-2000. In terms of the second factor, operating characteristics of nuclear reactors, the crucial question is whether these are likely to change in such a way as to allow savings in consumption of enriched uranium. The Uranium Institute points out that a variety of fuel management techniques could be utilised to reduce fuel consumption, and that such techniques have received 'widespread attention' during recent years. It concludes that the universal implementation of these techniques would lead to a significant reduction in uranium consumption, estimated at about 13 per cent annually by 2000 (Uranium Institute 1989, 18). This is, of course, a very significant reduction; if applied to the demand estimates calculated in the Draft Report, it would amount to 5,650 tonnes U. However, the Uranium Institute decided not to incorporate the impact of improved fuel management techniques into its forecast of reactor requirements, 'because they would be difficult to predict for each utility' (Uranium Institute 1989, 18)(6). This approach does not appear to be very logical. It is certainly true that an exact estimation of the impact of fuel management techniques is not possible, but the same applies, for example, to future capacity factors, yet the Institute is prepared to forecast the latter. It was also prepared to predict the impact of fuel management techniques in its 1986 supply and demand forecast (Uranium Institute 1986, 29-30, 89-90), and it is not at all clear why it has since become unacceptable to do so. While it seems safe to assume that all utilities will not take advantage of all available improvements in fuel management techniques, it seems equally clear that most will take advantage of some of these techniques. Thus their impact should certainly not be ignored in estimating future uranium demand. Again, it is important to stress the significance of this factor for uranium demand. If utilities actually achieved half of the savings which the Institute believes are possible in principle, uranium demand will be nearly 3,000 tonnes U lower in 2000 than would otherwise be the case, an amount larger than the combined capacity of the proposed Koongarra and Kintyre uranium projects (see Appendix 2). It should also be noted that by 2000 the impact of fuel savings at this level is comparable to the total effect of the change in the Uranium Institute's conversion factor (see above). The third assumption involves the enrichment tails assay figure. In its previous forecast, the Uranium Institute had assumed that the tails assay would fall to 0.20 by 2000, whereas it now assumes an assay of 0.25 per cent throughout 1991-2000. Again, the impact of this assumption is highly significant; the amount of uranium required annually could be decreased by 9 per cent by assuming an unchanged assay of 0.20 per cent (Uranium Institute 1989, 18,19). In economic terms, the enrichment tails assay will reflect the relative prices of enrichment services and natural uranium. For example, if enrichment services are becoming cheaper relative to the price of uranium, it will be in the utility's interest to purchase a higher level of enrichment services, maximising the quantity of enriched material it obtains from a given amount of natural uranium; the result will be a lower tails assay and a reduction in uranium consumption. If uranium prices are falling relative to those of enrichment services, the utility will act in the opposite way, minimising purchases of enrichment services, using more natural uranium, and allowing the tails assay to rise. At the time of the Institute's previous forecast, the price for enrichment services was falling because of excess capacity, and the planned development of laser technology was expected to reinforce this trend. By 1989 'expectations about the commercial use of laser technology [had] weakened', while uranium prices had continued to decline, and the Institute concluded that this required a downward revision to its earlier tails assay estimate (Uranium Institute 1989, 19). Uranium prices are certainly at very low levels in historical terms, and the Draft Report argued that this situation in unlikely to change significantly in the near future. However, prices for enrichment services have also continued to fall; for example, NUEXCO's SWU value fell by 12 per cent between December 1988 and November 1989. It is by no means apparent that they will increase significantly in the near future, and indeed some nuclear industry sources are predicting a more rapid decline in prices than has occurred in recent years (see, for example, Nuclear Fuel, 25 December 1989, 4). Thus while uranium prices will certainly remain low in absolute terms, it is not clear that they will fall further relative to those for enrichment services, and of course it is relative prices which will determine the tails assay. In summary, it appears that the assumptions underlying the Uranium Institute's most recent demand forecast are, taken together, excessively optimistic and do not in fact justify a change in the 'conversion factor' from 0.14 to 0.15. In particular, its decision to ignore improvements in fuel management techniques seems difficult to justify. As noted above, if only half the savings available in principle are actually utilised, the reduction in uranium demand would equal the total increase in demand which would result from revising the 'conversion factor' from 0. 14 to 0. 15. In these circumstances, it seems appropriate to retain the Institute's original conversion factor of 0.14 in converting generating capacity to uranium demand. Applying a requirement of 0.14 tonnes U to the last line of Table 1, we arrive at the following estimate for reactor requirements for uranium over the period 1991-2000 (see Table 3). TABLE 3 REACTOR-RELATED URANIUM REQUIREMENTS, WOCA, 1991-2000, TONNES U 1991 39,473 1992 40,370 1993 40,783 1994 41,718 1995 42,337 1996 42,912 1997 43,069 1998 43,566 1999 43,523 2000 43,447 NOTES 1 In Britain, for example, the Dungeness, Hartlepool and Heysham reactors were delayed for more than ten years (NUKEM Special Report, 10/1 984, 9). 2 'Plans for three new nuclear reactors scrapped', 'Death knell sounds for nuclear power industry', Guardian, 19 November 1989. On the private sector's unwillingness to bear the full costs of decommissioning and waste disposal, see also Hadley 1989. 3 It should be noted in this regard that the OECD/IAEA simply reproduces the information provided by national governments; its forecast for Japan's capacity is that provided by MITI. 4 The NUEXCO figure is derived from NUEXCO 1988, Table 1, 16, and Table 2, 18; the NUKEM figure from NUKEM Market Report, 12/1989, Table 4, 16-17, and Table 5, 26; the OECD figure from OECD/IAEA 1988a, Table 11, p.43 and Table 12, p.44; and the Uranium Institute figure from Uranium Institute 1986, Table 2.1, 12, and Table 3.1, 27. 5 The Institute now adds reprocessing capacity to its estimate of uranium supply, rather than subtracting it in calculating its estimate of demand. The figure of 0.15 is obtained by subtracting reprocessing capacity from uranium requirements, and dividing what is left by nuclear generating capacity (Uranium Institute 1989, Table II, 51; Table IV, 52; Figure 6, 50). 6 The Institute assumes that their impact is taken into account in its estimate of uranium procurements, which are calculated on the basis of estimates of future uranium purchases provided to it by individual utilities. URANIUM SUPPLY, 1991-2000 In order to assess likely uranium supply during 1991-2000, information has been collected on (i) All currently-operating WOCA uranium mines which produce more than 100 tonnes U308 (some smaller mines are also included). (ii) All uranium projects where public announcements have indicated a possible start to production before 2000. The relevant information is contained in Appendix I and Appendix 2 respectively. Comprehensive information is not available on some projects, especially in the United States (see below), which makes it more difficult to form an accurate picture of likely trends in uranium supply. There is also, of course, the fact that supply will be partly dependent on the perceptions of producers and possible producers regarding future uranium demand. On the other hand, as mentioned earlier, a substantial proportion of total supply will be accounted for by a small number of well established producers and a handful of new projects, and this simplifies matters to some extent. Information was sought for each mine or project on ownership, mining method, start-up date, nominal capacity and recent production (planned capacity for prospective mines), ore reserves and expected life. The text draws on this data to undertake a country-by-country analysis, and this in turn permits estimation of supply for each year during 1991-2000. All figures for production, capacity and uranium content of ore reserves are expressed in metric tonnes of uranium oxide (U308). MAJOR PRODUCING COUNTRIES AUSTRALIA Australia currently has two mines in operation, Ranger and Roxby Downs. Ranger commenced production in 1981, and output has been between 3,100 and 3,500 tonnes during recent years. In 1986 Energy Resources of Australia (ERA) announced plans to increase production to 4,500 tonnes by 1991 and to 6,000 tonnes by the end of 1992; Mining Journal reported in December 1988 that this was still its intention (23/30 December, 502), but ERA:s most recent Annual Report indicates a somewhat more cautious approach, stating its confidence that demand will warrant expansion 'by the early 1990s'. It is consequently assumed that Ranger's output will not be increased until 1992, and that the further expansion to 6,000 tonnes will not begin until 1994 and will be spread over 1994-1996. On this basis, Ranger's current reserves will support mining well beyond 2000. Roxby Downs commenced production in 1988. Its initial planned output was 1,900 tonnes, and it was intended to double capacity if market conditions permitted. (Reserves are adequate to support the higher level of production for many decades.) However, Roxby has encountered difficulties in marketing part of its planned output, and will produce only 1,450 tonnes in 1989. Negotiations are continuing for further sales contracts. It is assumed that output will increase to 1,900 tonnes by 1991, but that further expansion will not occur until 1996 and will be spread over 1996-98. Forecast (tU308): 1991 5,200 1996 8,800 1992 6,400 1997 9,300 1993 6,400 1998 9,800 1994 6,900 1999 9,800 1995 7,400 2000 9,800 CANADA Canada is the world's largest uranium producer, with output of 14,700 tonnes in 1988 from five mines or mining complexes. Some 35 per cent of output came from older, low-grade mines at Elliot Lake in Ontario operated by Denison Mines Ltd and Rio Algom. Denison has produced about 2,300 tonnes at Elliot Lake during recent years, and has sufficient ore to support output at this level well beyond the end of the century; the key issue is whether it will be economically feasible to exploit them. Denison has long-term contracts with Ontario Hydro, and these would be sufficient to absorb its Elliot Lake output until 2012. These contracts specify price levels which guarantee Denison a profit after payment of production costs; as a result the average value of uranium shipments from Ontario in 1987, for example, was C$44.50 per lb, about 70 per cent above the value of Saskatchewan shipments (NUKEM Market Report, 10/1988, 7). The company is under pressure from Ontario Hydro to reduce its contract prices after 1993, but Denison has succeeded in cutting costs substantially during recent years (Canadian Mining Journal, February 1986, 83) and political pressure will certainly be placed on the government-owned Ontario Hydro to continue to support mining at Elliot Lake (see, for example, Nuclear Fuel, 17 October 1988, 4-5), particularly now that Rio Algom is to close part of its operations (see below). It thus seems likely that Denison's operations at Elliot Lake will be maintained until at least 2000. However, the company is developing a new deposit at Midwest Lake in Saskatchewan, with a planned capacity of 1,350 tonnes; it has stated that output from Midwest is aimed at meeting projected growth in uranium demand, but if growth in demand is lower than Denison expects it would presumably substitute for higher-cost Elliot Lake output. It is assumed that the combined output of Denison's operations during 1991-2000 will be close to recent output from Elliot Lake; but it should be kept in mind that the company will have the capacity to increase output quickly if demand warrants it. Production at Rio Algom's Elliot Lake mines has averaged about 2,800 tonnes during recent years; the company has favourable long-term contracts for about 1,000 tonnes of its output until 2020. Rio Algom has also been under pressure to cut its contract prices with Ontario Hydro, and despite cost reduction programmes its production costs have remained high, especially at the Quirke and Panel mines. In January 1990 the company announced that it would close both these mines but that Stanleigh will remain open; reserves there are adequate to support production at an annual rate of 1,000 tonnes until 2020. It is consequently assumed that annual output will be 1,000 tonnes from mid 1991 to 2000. Cluff Lake is the smallest of the three Saskatchewan producers (1,000 tonnes per annum). It is a low-cost producer and its reserves are adequate to support mining for twenty years; it is thus assumed that output will remain at current levels during 1991-2000. The life of Cameco's Rabbit Lake operations, which increased its output to 3,136 in 1988, has been very substantially extended by the discovery of large reserves in the nearby Eagle Point South and North deposits. Cameco has closed Rabbit Lake for six months from July 1989, partly because of poor market conditions, partly to modify its mill. It has announced that capacity will be increased to 5,450 tonnes as a result of the modification. Given the depressed state of the uranium market, it is unlikely that this capacity will be utilised in the short term. However, ore reserves are certainly adequate to support a higher level of output for many years, and it appears that output will increase if and when market opportunities become available. It is assumed here that output from Rabbit Lake will increase to 4,000 tonnes in 1993 and will remain at that level for the rest of the decade. Key Lake is the largest uranium mine in the world, with output averaging 5,800 during recent years. However, its ore reserves are limited, and will only support operations until 1998 or 1999. Output is expected to remain at current levels into the late 1990s, but to decline in 1998 and 1999, ceasing at the end of 1999. Canada also has a number of major uranium projects which are expected to commence production in the 1990s. By far the most important is Cigar Lake, which contains 175,000 tonnes U308 in very high-grade ore (see Appendix 2). Production is scheduled to commence in 1993 and reach capacity (5,500 tonnes) in 1995. This schedule may be optimistic; while test mining is being conducted in 1990, major difficulties are involved in mining very high- grade uranium ores. It is assumed here that production will not commence until 1995, and that full capacity will not be achieved until 1997. A number of other, smaller deposits are also likely to be developed. Denison's Midwest lake has already been discussed. Dawn Lake and McLean lake are scheduled to achieve full production in 1999, but given their stage of development little certainty can be attached to this date, and it is consequently assumed that they will not produce before 2000. Urangesellschaft is further advanced in its planning for development of Kiggavik in the Northwest Territories, with initial production scheduled for the mid 1990s. Again assuming some delay in development, initial production is assumed to occur in 1998 and full production (1,600 tonnes) in 1999. Combining the above, we obtain the following forecast for Canada's uranium output during 1991-2000: Forecast (tU308): 1991 14,000 1996 17,100 1992 13,100 1997 19,600 1993 13,100 1998 18,300 1994 14,100 1999 16,800 1995 15,100 2000 17,400 FRANCE France has two major uranium mining operations, with both Cogema and the Total group operating a number of small mines and a central milling facility (see Appendix 1). Cogema has produced about 3,100 tonnes during recent years, the Total group about 700 tonnes. Each has sufficient reserves to support mining until beyond 2000. France depends on nuclear fuel for 75 per cent of its electricity, and possession of domestic uranium mining capacity is vital to its energy security. It is therefore inconceivable that uranium mining would cease as long as reserves are adequate to sustain it, and it is assumed that France's output will remain at current levels during 1991-2000. Forecast (tU308): 3,800 during 1991-2000 GABON Gabon has one uranium mining venture, located at Mounana; it is operated and largely owned by French interests. During recent years production has averaged 1,000 tonnes; its nominal capacity is substantially larger and its output was somewhat higher in the early 1980s, but was reduced in response to poor market conditions. Gabon is a high-cost producer, but its French shareholders purchase much of its output, giving it a secure market. Its ore reserves are more than adequate to support mining for many years, and it is assured that Gabon will produce at recent levels for the rest of the century. Forecast (tU308): 1,000 during 1991-2000 NAMIBIA Namibia has one major uranium mine, Rossing, which has produced 4,100 tonnes during recent years. There has been some suggestion that Rossing's output might fall as a result of UN trade sanctions against Namibia, but this now appears very unlikely as a political settlement approaches, and indeed its location in a newly independent Namibia may be a positive advantage to Rossing. Ore reserves are sufficient to support 20 years of mining at recent levels, and it is assumed that output remains at about 4,100 tonnes to the end of the century. Forecast (tU308): 4,100 during 1991-2000 NIGER Niger has two major uranium mining operations, at Akouta and Arlit, operated and largely owned by French interests, who purchase a substantial proportion of mine output. During recent years their combined production has been about 3,700 tonnes; both have ore reserves sufficient to support mining for about 30 years at this rate. Niger produced substantially more uranium in the early 1980s (4,800 tonnes in 1982), and has the mill capacity and reserves to quickly achieve this level if demand justifies it (see Appendix 1). However, it is assumed here that output will remain at the current level during 1991-2000. Forecast (tU308): 3,700 during 1991-2000 SOUTH AFRICA Uranium is produced in South Africa entirely as a byproduct of gold mining and, in one case, of copper mining. Output has fallen steadily during recent years, from about 7,000 tonnes in 1980 to an estimated 4,500 tonnes in 1988, and is expected to fall below 4,000 tonnes in 1989; four firms stopped producing uranium in 1988 alone. Until very recently the major reasons for the decline have been falling ore grades and poor market conditions; in this latter regard, some producers have the option of switching equipment used in extracting uranium to gold production, and so tend to react to price changes more quickly than firms engaged solely in uranium production. However, in 1988, trade sanctions against South Africa started to have a significant impact for the first time, and Japanese utilities were reportedly refusing to renew contracts with South African suppliers (Mining Journal 4 November 1988, 355). One firm ceased production after a major customer cancelled its contracts in response to political pressure. A further decline in output is likely to occur in the near future, assuming that markets remain depressed and that the pressure to enforce sanctions against South Africa continues. However, it is likely that a number of the major producers will continue to produce at or close to their current levels. In particular, Vaal Reefs and Freegold (see Appendix 1) are two of the largest gold producers in the world; uranium is a by-product of their gold mining operations, and output tends to follow gold production. Their uranium production costs are low, and they have adequate ore reserves to support mining well beyond 2000. Despite sanctions they are very unlikely to be denied access to uranium markets, as some consumers are indifferent to the source of uranium while others have a positive preference for South African material due to the absence of nuclear safeguard provisions. They may have to accept lower prices to dispose of their output, but given their low costs this is unlikely to prevent them from producing uranium. It is assumed that production will fall to 3,500 tonnes in 1991, 3000 tonnes in 1994, and 2,500 tonnes in 1997 as a number of smaller producers deplete their orebodies. However, it must be kept in mind that producers who have switched processing capacity from uranium to gold or who have ceased processing of slimes dams can resume uranium production quickly if economic and political circumstances are favourable. Indeed South Africa's Atomic Energy Commission predicts that output will in fact recover, rising to 6,000 tonnes by 1997 (Mining Journal, 9 September 1988,209). Forecast (t U308): 1991-1993 3,500 1994-1996 3,000 1997-2000 2,500 UNITED STATES The United States has a substantial number of uranium producers, and they extract uranium in conventional mining operations, through solution mining, and as a by-product of phosphoric acid production. Many of these producers are small, and it is difficult to obtain accurate information on their activities and investment plans. For example, most of the companies active in recent developments (Malapai Resources, US Energy Corporation, Energy Fuels Nuclear, Everest Minerals, Uranium Resources) are not listed in the Financial Times Mining Yearbook. Uranium production in the United States has fallen sharply during recent years, from nearly 20,000 tonnes in 1980 to about 5,500 tonnes in 1987, mainly due to the inability of its low-grade/high cost mines to compete with efficient producers in Australia, Canada and South Africa. It is inconceivable that the United States will recover its position as the world's leading producer, but 1988 did represent a turning point for its uranium industry. New projects were established, construction commenced on others, and some mines were reopened under different ownership. Production from new or re-opened mines amounted to 1,975 tonnes in 1988 (see Appendix 1), and will be higher in 1989 as new projects achieve full production. These additions to capacity more than offset closures and cut-backs, leading to an increase in output to about 6,100 tonnes in 1988. Many of these new or re-activated projects have low operating costs, and are well capable of competing effectively for domestic and export markets" Crow Butte, for example, which will commence production in late 1989, is expected to produce U308 at less than US$10 a pound, while Kingsville Dome had total costs of US$10.57 in 1988 (Uranium Resources Inc, Annual Report 1988, 8). Firms producing uranium as a by-product also have low production costs, as do the conventional mines which have survived the period of severely depressed prices. It thus seems certain that the United States will continue as a major uranium producer. Some of the mines which opened in 1988 do have fairly limited lives (i.e. until the mid 1990s). However, some have substantial reserves and plan to expand output in the early 1990s, while development has started on other new projects, and this will help to maintain production during the second half of the decade. In addition, a number of foreign companies have purchased properties containing uranium resources, and they clearly plan to develop these. Rio Algom, for example, recently paid US$28.5 million and guaranteed reclamation liabilities of a further US$25.8 million to obtain KerrMcGee's uranium holdings, and has stated its intention of continuing development and test programmes at the Wyoming properties (Nuclear Fuel, 23 January 1989, 2). In mid 1989 Britain's Central Electricity Generating Board (CEGB) purchased Everest Minerals, owner of the Highland and Hobson uranium projects (see Appendix l); both are regarded as low-cost producers, and Highland has the capacity to quickly and substantially expand output (Nuclear Fuel, 1 May 1989, 1,14-15). If projects with publicly announced schedules proceeded as planned, US output would rise to 7,920 in 1991 and 9,220 in 1992, would be between 8,000 and 9,000 in the mid 1990s, and decline to between 7,000 and 8,000 in 2000. (The range reflects the absence of information on ore reserves for some currently operating mines [see Appendix 1], with the lower end of the range based on the assumption that reserves at these mines will be exhausted by 1995). Delays may of course occur in some projects, but on the basis of the above figures it seems reasonable to assume that output will be in the region of 7,500 in the early 1990s, rising to 8,000 in the mid 1990s and declining to about 7,000 by the end of the decade. This assumes, of course, that no new projects or expansions are undertaken which do not currently have published schedules (e.g. Rio Algom's Wyoming properties, CEGB's Highland mine). Forecast (t U308): 1991-1993 7,500 1994-1996 8,000 1997-2000 7,000 MINOR PRODUCING COUNTRIES ARGENTINA Argentina has one small uranium mining operation based on three separate mines and producing about 180 tonnes per annum, intended to supply fuel for domestic use only. Ore reserves are limited, but a new deposit is being developed at San Rafael, where reserves can support mining at the current rate for about 25 years. Since further expansion of the country's nuclear power capacity seems unlikely, it can be assumed that uranium output will remain at current levels. Forecast (t U308): 180 during 1991-2000 BRAZIL Brazil has produced small quantities of uranium from the Pocos de Caldas mine during recent years, but this closed during 1988 due to financial difficulties. In early 1989 NUEXCO reported the opening of a plant which will separate uranium from phosphoric acid, with a capacity of about 360 tonnes. No indication was given as to whether this capacity would be achieved immediately, but it is assumed that it will have been reached by 1991. In the absence of information on any expansion plans, it is assumed that output will remain at this level throughout the 1990s. Forecast (tU308): 360 during 1991-2000 INDIA Very little information is available regarding uranium mining in India. A number of mines have operated in the past, and two (Jadugada and Bhalin) are currently producing. They are owned by the Indian government and provide fuel for India's domestic nuclear programme. Their output is modest (about 140 tonnes); it is assumed that they will continue to operate at about this level. Forecast (tU308): 140 during 1991-2000 PORTUGAL Portugal currently produces about 180 tonnes of uranium from the Urgeirica mine. A second project (Alto Alentejo) is being developed and is scheduled to commence production in 1991, with a capacity of 240 tonnes. Data provided by Portugal to the OECD indicates that both mines will continue to operate for the remainder of the decade. Portugal's uranium reserves are limited, and any further expansion is consequently unlikely. Allowing for some delay in project development, it is assumed here that Alto Alentejo achieves capacity in 1993, and that Portugal produces about 400 tonnes for the remainder of the decade. Forecast (tU308): 1991-1992 180 1993-200 400 SPAIN Spain's government-owned uranium producer, Enusa, has produced between 200 and 300 tonnes from its Salamanca and Badajoz mines during recent years. The Spanish government informed the OECD in 1987 that Spain's production capability would increase to 400 tonnes in 1990 and 1,000 tonnes in 1995 as a result of a planned expansion at Salamanca, designed to help Spain's nuclear power industry meet its uranium requirements (estimated at about 1,800 tonnes U308 per annum in the 1990s) from domestic sources. However, while ore reserves appear adequate to support the higher levels of output, these expansion plans have not yet been put into effect, and ENUSA is reportedly now discussing with the Spanish government whether to expand Salamanca in the early 1990s. In the absence of any concrete information on implementation of expansion plans, it is assumed that output will remain at the current level until 1991-2000. Forecast (tU308): 250 during 1991-2000 SUPPLY FORECAST In addition to uranium production from WOCA mines, exports from non-WOCA countries must be taken into account. It is very evident that China, in particular, is keen to become a significant exporter of uranium. It has already made some spot market sales to Europe and concluded long-term contracts with European utilities, and in 1988 signed its first long-term contract with a United States utility. NUEXCO estimates that China is currently able to export between 900 and 1800 tonnes U308 per annum. The Soviet Union was also active in international markets in 1988, though it is not yet clear whether it will also negotiate long term contracts. Figures of 1,600 tonnes per annum during 1991-1995 and 2,000 tonnes during 1996-2000 are unlikely to overestimate WOCA imports. Table 4 (not included here) combines these figures with the estimates of production for individual countries to calculate a forecast for WOCA uranium supply in each year during 1991-2000. It indicates that supply from existing and planned mines will grow from just over 45,000 tonnes in 1991 to around 55,300 tonnes in 1997, declining thereafter to around 52,500 in 1999 and 2000. How does this forecast compare with other estimates of uranium supply? Only NUEXCO attempts to forecast actual production during 1991-2000 and provides a country-by-country breakdown of its forecast. Its figures for the period 1991-1994 are very similar to my own, with only between 100 and 800 tonnes separating the two estimates. However, there is a significant divergence for the years 1995-99, with NUEXCO's being about 5,000 tonnes higher than mine (E & MJ, March 1989, 46). The discrepancy is mainly due to NUEXCO's assumption that additional Australian and Canadian capacity will actually come on line as currently scheduled, whereas I have assumed some delays; and that output from what NUEXCO classifies as 'other producers' will rise substantially, from about 5,200 tonnes in 1994 to 7,400 tonnes in 1997. There is little evidence that any such increase will come from producers such as India, Portugal and Spain; NUEXCO must expect much of it to be accounted for by China. It should be kept in mind that NUEXCO's forecast of uranium demand is higher than my own. The Uranium Institute and the OECD/IAEA do not forecast uranium supply but estimate future mining 'capacity' or 'capability', and so a direct comparison is not possible. The Uranium Institute predicts production capacity for 'operating' and 'planned' projects at 61,400 tonnes in 1995 and 59,500 tonnes in 2000. These refer to nominal capacity rather than actual output and they consequently are, as one would expect, well above my own estimates (48,930 and 52,630 tonnes respectively). Production at this latter level would represent a rate of capacity utilisation of 80 per cent in 1995 and 88 per cent in 2000. These rates do not seem unrealistic, given that capacity utilisation averaged 77 per cent between 1986 and 1988, a period of severe over-capacity in the uranium mining industry. The OECD/IAEA's estimates 'production capability' from lower cost resources (recoverable at costs of $80/kg U or less) and from lower and higher cost resources (recoverable at $130/kg U or less), distinguishing between capability from 'existing and committed' centres on the one hand and from planned and prospective' centres on the other (OECD 1988b, Table III, 6). It estimates production capability from lower cost resources for existing and committed production centres at 46,500 tonnes in 1995; this is somewhat lower than my own estimate (48,930), but of course it does not include any projects which are planned but not 'committed'. Capability from all lower cost production centres is estimated at 55,000 tonnes-, this is substantially higher than my estimate, but it is identical to my figure for 1997 (see Table 4), indicating that the discrepancy may reflect my assumption that delays will occur in bringing on planned new capacity. The OECD/IAEA's estimates of production capability in 2000 ranges from 40,750 tonnes (for existing or committed projects from lower cost resources) to 63,200 tonnes (for all projects from lower and higher cost resources); my own figure of 52,600 is almost exactly in the middle of this range. THE SUPPLY/DEMAND BALANCE AND URANIUM PRICES, 1991-2000 The demand and supply figures from Tables 3 and 4 are combined in Table 5 to provide a supply/demand balance for newly mined uranium. This indicates that demand will be in excess of supply during 1991-95, by an average of about 1,700 tonnes U per annum. However, during 1996-1998 supply exceeds demand by a substantial margin (an average of 2,100 tonnes U per annum), mainly due to the coming on line of additional production in Australia and Canada. The excess supply declines at the end of the decade because of the exhaustion of ore reserves at a number of Canadian mines. Over the decade as a whole, supply and demand are almost exactly in balance. It should be kept in mind that the supply estimates assume that delays will occur in the current schedules for all planned expansions and new mines, that spare capacity in Gabon, Niger and South Africa will not be utilised, that Denison Mines will not make a net addition to its total output, and that Spain does not implement its expansion plans. If any of these assumptions proves to be unfounded, then supply is likely to exceed demand. What are the implications of these findings for uranium prices, and for the likely consequences of developing additional new capacity in Australia? To address this issue, it is necessary to examine the history of uranium markets and prices during recent decades (1). Large-scale uranium mining commenced in the 1950s in response to demand from nuclear weapons programmes, with the British and United States governments offering attractive prices to encourage development of mining capacity; Radetzki has estimated that average prices during 1950-1955 ranged between US$30 and US$35 (in 1975/76 dollars)(Radetzki 1981, 41). However, by the end of the 1950s military needs had largely been satisfied, and commercial demand for reactor fuel had not yet developed. In 1964 the United States uranium market was closed to imports. The industry found itself with large excess capacity, prices declined severely and mines were closed in Australia, Canada, the United States and South Africa; output declined by more than half between 1959 and 1965. Prices remained depressed until the early 1970s. So, for example, in July 1972 NUEXCO's Exchange Value was US$5.95 per pound U308 for spot (i.e. immediate) deliveries, and US$8.30 for delivery in July 1977. Prices rose very rapidly in the mid 1970s, with average spot prices increasing by 6.6 times in nominal terms and 4.8 times in real terms between 1973 and 1976 (Radetzki 1981, 30). Spot sales accounted for only 5 to 10 per cent of the total market (2), but increases in spot prices flowed through to long-term contracts, both by influencing price levels in newly signed contracts and through renegotiation of existing contracts in favour of producers. A number of factors accounted for these dramatic price increases (3). Plans for construction of reprocessing plants were repeatedly delayed by the United States government, adding to demand for newly mined uranium. United States authorities announced plans to raise the tails assay for its enrichment plants, which would significantly increase the amount of natural uranium needed by utilities to meet their reactor requirements. They also introduced fixed commitment enrichment contracts, requiring utilities to supply fixed quantities of natural uranium at specified times; fearing a future shortage of enrichment capacity, the utilities felt compelled to accept such contracts. These initiatives led utilities to increase their uranium purchases, putting pressure on prices. (For a detailed discussion of the impact of US enrichment policies on the uranium market, see Jelinek-Fink 1978.) The oil crisis also had a major impact, pushing up energy prices generally, but also appearing to improve the economics of nuclear power generation and so supporting optimistic forecasts of uranium demand. In the meantime, uranium producers and some producer country governments had established a cartel which set minimum prices, divided the world market among participating producers, and restricted supply until target price increases were achieved (Radetzki 1981, 116-119). However, prices peaked in real terms in 1977 and by 1979 were declining in nominal terms also. This reflected substantial downward revisions of plans for nuclear power development (due partly to lower growth in energy consumption and partly to political and economic problems faced by the nuclear industry), the revocation by the US government of plans to increase tails assay, the success of utilities in avoiding enrichment contracts excess to their needs, and the weakening of the uranium cartel, due partly to the publicity drawn to its activities by the Westinghouse law suits (see Venturini 1982 for details). Perhaps most importantly, higher prices and the long-term contracts offered by utilities had resulted in development of substantial new capacity; between 1975 and 1980 WOCA production increased at a compound annual rate of over 18 per cent (Townsend 1983, 76). This both put downward pressure on prices and reduced the cartel's control over the market. By 1980 production was approximately twice consumption, and stock levels had risen very substantially. In early 1985 commercial stocks were estimated by NUEXCO at five years' forward consumption (NUEXCO Monthly Report on the Nuclear Fuel Cycle, March 1985, 13), as opposed to the one or two years' consumption usually regarded as a desirable level. (In comparison, world stocks of copper were only about three months' forward supply.) NUEXCO's average exchange values for spot transactions fell from US$40 in January 1980 to US$17 in August 1982 (4). Spot prices recovered somewhat in late 1982 and early 1983, reaching US$24 in August 1983. However, production was still well above consumption (by an estimated 6,000 tonnes U in 1983), and the downward trend in prices continued, with NUEXCO's average exchange value falling to US$15 in January 1985. Uranium consumption exceeded production for the first time in the history of the civil nuclear industry in 1985. In both 1986 and 1987 production was estimated at about 4,000 tonnes less than consumption (Mining Annual Review, 1988, 83-84). Many commentators expected that this shortfall in supply would lead to a draw-down in stocks which would, in turn, allow some price recovery(5). However, it must be kept in mind that stocks detailed by member countries to the OECD/IAEA in 1985 totalled 172,000 tonnes U (OECD/IAEA 1986). Thus the supply shortfall in 1986 and 1987 would have absorbed only 4.7 per cent of total reported stocks, with the balance still equivalent to nearly four years' forward consumption. In fact prices continued their downward spiral in 1988, and the trend has persisted during 1989 and into 1990. NUEXCO's average exchange value for spot transactions fell from $16.30 in January 1988 to US$10.70 in March 1989, and fell below US$9.00 in January 1990; the latter is its lowest level ever in real terms. The fundamental cause of the price decline was that utilities continued to draw down stocks and reduce their purchases from uranium producers, leaving the producers to compete aggressively among themselves and with China and the Soviet Union for the remaining orders. The passage of the US-Canada Free Trade Agreement (which guarantees access for Canadian uranium to the US market), the failure of proposals by US uranium producers for protectionist legislation, and the continued downward revision of estimates of future uranium demand also had an impact. The continuing decline in prices during 1986-1990 shows very clearly that a modest decline in high levels of uranium stocks is not in itself sufficient to stabilise prices at low levels, let alone bring about price recovery. Falling spot market prices have already had a major, though lagged, effect on long-term contract prices, and they will continue to do so. According to NUKEM, average contract prices in the US fell from US$34.15 in 1983 to $23.95 in 1987, a decline of 30 per cent in nominal terms (NUKEM Market Report, 4/1989, 14). The impact of falling spot prices is even more evident from contracts signed recently between a number of US producers and Japanese utilities for the period 1989-2000; prices are reportedly between US$15 and US$20 a pound U308 (Hallam 1988, 97-98; E & MJ, March 1989, 45). In recent years long-term contracts based on spot prices have become increasingly popular (NUKEM Market Report, 1/1989, 2), which will mean that in the future, changes in spot prices will flow through to contract prices more directly and quickly. Indeed NUEXCO reports in its most recent Annual Review that some producers have been offering discounts from spot prices in attempts to secure long-term contracts, and that this in turn has placed further downward pressure on spot prices (NUEXCO, 1988 Annual Review, 2). Details of three contracts based on spot prices were provided by Nuclear Fuel in May 1989. The contract between US Energy Corporation and a US utility, for example, uses the average of the NUEXCO exchange value over the three months prior to delivery as the basis for pricing, expressly acknowledges that there is no minimum or floor price for the contract, and provides for a graduated discount which increases as the spot price rises (Nuclear Fuel, 1 May 1989, 4). Export prices for Australia's uranium have also been affected by the trend in spot markets. Contracts for Ranger's output had included a guaranteed base price adjusted for inflation during the early years of the project; as soon as this guarantee expired, the depressed state of the spot market resulted in a decline in Ranger's prices to the Australian government export floor price (Energy Resources of Australia, Annual Report, 1985). Neither has the government's floor price offered any protection against a fall in real prices; in constant Australian dollars, it fell by 31 per cent between 1979 and 1985 (O'Faircheallaigh 1989b, 12). Declining spot prices have also made it impossible for the Commonwealth government to maintain the floor price in nominal terms. There have been repeated reports during the last few years that ERA and Western Mining Corporation had negotiated contracts at prices below the floor (6), and on 4 September 1989 Resources and Energy Minister John Kerin approved a floor price of US$26.00 for export sales to Japanese and Swedish utilities in 1990-91, a 16 per cent fall from the previous level (Australian Business, 4 October 1989, 17). Looking now to the future, consumption is likely to exceed production by some 15,000 tonnes U during 1988-1990 (7), with stocks falling by an equivalent amount. A reduction in stocks of this magnitude is unlikely to have a major impact on uranium prices; there is certainly no indication of such an impact as of January 1990. Thus it seems likely that uranium prices will be, at best, slightly higher than their current levels at the start of 1991 (8). Against this background, what are the implications of the supply/demand estimates for 1991-2000 contained in Table 5? The first point to note is that stocks will still be very substantial at the start of the period, in excess of 150,000 tonnes U or about 3.5 years' forward consumption. The projected shortfall of supply during 1991-1995 can be met by a small reduction in stocks (equivalent to only 5.7 per cent of the total). It thus appears unlikely that prices will increase substantially during 1991-1995, though some price recovery is likely. For the remainder of the decade, the figures indicate an oversupply of uranium of about 7,200 tonnes, implying an increase in stocks of some 5 per cent. This is likely to put downward pressure on prices, partly negating any increase achieved during the first half of the decade. In sum, the supply/demand contained in Table 5 implies that during 1991-2000 uranium prices are unlikely to rise significantly above their current level, which is of course very depressed in historical terms. What would be the impact of bringing additional capacity on line in Australia during 1991-2000? Table 6 indicates the potential impact on the supply/ demand balance of bringing on line (a) either the Koongarra or the Kintyre projects, both of which have a planned output of about 1,000 tonnes U per annum (b) one of these two deposits and the larger Jabiluka project, with a combined output of 3,500 tonnes U. Koongarra or Kintyre alone would change the slight expected shortfall in supply to a surplus of about 8,500 tonnes U, reducing the likelihood of even a modest price recovery. Jabiluka, along with one of the smaller projects, would convert the forecast supply shortfall during 1991-1995 into an over- supply of nearly 9,000 tonnes U, implying an increase of about 6 per cent in reported stocks and placing downward pressure on prices. They would push over-supply up to about 25,000 tonnes during 1995-2000, leading to a further increase in stocks of about 16 per cent and very probably exercising a marked downward pressure on uranium prices. These conclusions raise two important issues. First, there is the question of whether the new projects would generate an adequate return to the private investors involved, to traditional Aboriginal landowners affected by these projects, and to Australian society. Australian governments and the Australian public apparently perceive that uranium mining in the Kakadu region brings with it significant risks of environmental damage to an area of unique biological and cultural significance, and risk of adverse social and cultural impacts on affected Aboriginal communities. Establishment of new mining projects usually involves substantial public investments, and so public funds are also at risk(9). Will the returns justify the risk, given a supply/demand situation which would almost certainly result in uranium prices remaining at their current low levels during the early 1990s and probably declining further during the late 1990s? The second point relates to the impact of the new projects on Ranger and Roxby Downs. An oversupply of the magnitude indicated by the last line of Table 6 would exert significant downward pressure on spot prices and, as we have seen, this would inevitably flow through to contract prices. As a result, output from Ranger and Roxby Downs, estimated at about 7,500 tonnes U308 in the mid 1990s and 9,800 tonnes in the late 1990s, would be sold at lower prices than would otherwise be the case. This would result in a loss of income to shareholders, Aborigines affected by the Ranger mine, and the Commonwealth, Northern Territory and South Australian governments. NOTES 1 By far the best analysis of uranium markets and prices over the period 1955-1980 is Radetzki 1981. 2 The spot market accounted for a larger proportion of total demand in the mid 1980s, but in 1988 declined again to its traditional level (8.8 per cent of total WOCA reactor demand). Spot markets are more important in the United States, where they accounted for 20 per cent of reactor demand in 1988 (NUKEM Market Report, 1/1989,6). 3 For a comprehensive analysis, see Radetzki 1981, Chapters 4-8. 4 All spot price quotations are from the historical data presented in NUEXCO Monthly Report on the Nuclear Fuel Cycle, April 1989, 24. 5 A number of examples are cited by Hallam 1988, 44-45. See also E & MJ, March 1986, 'Uranium'. 6 A number of such reports are cited by Hallam 1988, 73,100,102-3- see also Mining Journal, 26 February 1988, 316. 7 This figure is based on the Uranium Institute's estimates of reactor requirements for 1988-1990 (Mining Annual Review, 1988, 83), and on the assumption that production will stay at or near its 1988 level of about 38,000 tonnes U. 8 This view is shared, for example, by NUKEM, which in March 1989 expressed the view that there was little to support the case for price increases in the short term: NUKEM Market Report, 3/1989. Nuclear Fuel reports that its annual survey of utility fuel managers produced a median estimate of US$9.65 per pound U308 for the spot price at the end of 1990: Nuclear Fuel, 25 December 1989, 3. 9 For a detailed discussion of these points, see O'Faircheallaigh 1987, 28. CONCLUSION Taking account of recent developments in relation to existing nuclear power plants and applying realistic (though still possibly optimistic) schedules to new developments, this study has calculated estimates of future nuclear power plant capacity which are slightly lower than other published forecasts for 1995, and significantly lower (by between 7 and 9 per cent) than other forecasts for 2000. This data was then used to calculate demand for newly mined uranium in each year from 1991 to 2000. The study analyzed detailed data relating to some 40 existing uranium mines and twenty planned projects to estimate supply during the same period. Again, what are regarded as more realistic timetables were applied to development of additional planned capacity; in particular, some major expansions and new projects currently scheduled to come on line during 1993-1996 are expected to commence during 1995-1997. Supply is assumed to be significantly below potential capacity, with producers in Canada, Niger, Spain and South Africa, in particular, expected to under-utilise their production capabilities. Combining the estimates for supply and demand, the study forecasts a small shortfall in supply during 1991-95. However, this shortfall can be covered by a slight reduction in the uranium stocks which will exist at that time and, on the basis of experience during recent years, it is unlikely to result in more than a modest increase in prices. Supply is expected to significantly exceed demand from 1996-98, and to slightly exceed demand in 1999-2000. This is likely to exert downward pressure on uranium prices, keeping them close to their current low levels in real terms. Development of even one small new uranium project in Australia would more than cancel out the slight supply shortfall forecast for the 1990s, while establishment of a large project such as Jabiluka would lead to significant over-supply during 1991-1995, and result in an even larger build-up of stocks and stronger downward pressure on prices in the second half of the decade. This would not only threaten the economic viability of the projects concerned, but would also diminish Australia's returns from its existing uranium mines. REFERENCES Crowson, P., 1986. 'Uranium as a commodity: lessons for the future', in Uranium Institute, Uranium and Nuclear Energy 1985: Proceedings of the Tenth International Symposium held by the Uranium Institute, The Uranium Institute, London, 351-64. Hadley, G.H., 1989. 'Deregulation of electricity supply and nuclear energy privatisation in the UK', Paper presented to the Uranium Institute's Annual Symposium, London, 6-8 September 1989. Hallam, J.R., 1988. The Nuclear Industry and Uranium Marketing: Friends of the Earth Report, Sydney. Jelinek-Fink, P., Uranium Supply and Demand: Proceedings of the Third International Symposium held by the Uranium Institute, Mining Journal Books and the Uranium Institute, London, 45-58. NUEXCO, 1988. 'World Uranium Consumption Forecast (1988-2000)', NUEXCO Monthly Report on the Nuclear Fuel Cycle, July, 16-23. OECD/IAEA, 1986. Uranium Resources, Production and Demand, OECD, Paris. 1987. Nuclear Energy and its Fuel Cycle: Prospects to 2025, OECD, Paris. 1988a. Uranium Resources, Production and Demand, OECD, Paris, March. 1988b. Uranium Resources, Production and Demand: Statistical Update 1988, OECD, Paris. O'Faircheallaigh, C., 1987. 'Future Markets for Kakadu Uranium', AusIMM Bulletin, Vol 292, No 4, June, 28-33. 1989a. Uranium Supply, Demand and Prices, 1991-2000: A Report to Greenpeace Australia, Draft Report, Brisbane, August. 1989b. 'Submission to the Labor Party Uranium Policy Review Committee, Canberra, 21 May 1989, Mimeo. Owen, A., 1983. 'The Market for Australian Uranium', Australian Quarterly, 55, 4-18. Radetzki, M., 1981. Uranium: A Strategic Source of Energy, Croom Helm Ltd, London. Townsend, M., 1983. 'Some aspects of the outlook for uranium supply and demand', Uranium and Nuclear Energy 1983: Proceedings of the Eighth International Symposium held by the Uranium Institute, The Uranium Institute, London, 73-83. Uranium Institute, 1986. The Uranium Market 1986 - 2000, Uranium Institute, London, December. Uranium Institute, 1989. Uranium Market Issues 1989-2005, Uranium Institute, London, July. Venturini, V.G., 1982. Partners in Ecocide: Australia's Complicity in the Uranium Cartel, Rigmarole Books, Melbourne.