'Disentangling' the global nuclear fuel supply chain after Russia's invasion of Ukraine

In the world of nuclear energy, things rarely move quickly. Nuclear power reactors often take 10 years or more to license and build, and then can operate for six or more decades.

Nuclear fuel is only replaced in a reactor at most once a year, or every 18 or 24 months. Uranium can take more than a year to be mined, milled, converted to a gas form, enriched in fissile uranium-235 and fabricated into the fuel bundles that are lowered into reactors during refueling.

So while the impact of Russia's Feb. 24 invasion of Ukraine on the world of nuclear fuel was not immediate, by nuclear standards it is proving exceedingly fast.

Russia is a key global supplier of nuclear fuel, especially to the Eastern European countries that operate Soviet-designed nuclear plants, for which Russia's state nuclear company is often the only supply option. But its long history as a reliable and low-cost supplier has made Russia the source for almost a third of all uranium conversion services and 40% of enrichment globally.

Even in the far-away US, Russia supplies a fifth of enrichment to nuclear operators.

Reaction to the war has been marked by a desire to stop sending money to Russia for its commodities, but a concern that cutting off the taps on Russian fuel could bring chaos to markets and end-users. That is true in uranium as well, which was exempted from the initial rounds of US sanctions.

However, there is a growing chorus of legislators in the US and Europe calling for bans on the use of Russian nuclear fuel components – mined uranium, converted uranium hexafluoride and enriched uranium.

The US Department of Energy established a "tiger team" to study the impact of such a ban and develop a plan to ensure security of supply. In early June, DOE started briefing Congressional staff on a plan that could cost between $3.5 billion and $4 billion to secure a domestic nuclear fuel supply chain to replace Russian vendors.

In late June, there were reports that changes in Canadian sanctions applications had caused shippers to back out of plans to bring uranium enriched in Russia from the port of St. Petersburg to the US, sending utility recipients scrambling to find alternate supply.

Nuclear industry officials perceive a sea change—a move away from a vendor who was involved in every aspect of the fuel cycle, enjoyed a good reputation for its technology and reliability, and often offered the lowest prices.

Spot prices of enrichment services, where Russia's state-owned company Tenex is the largest global player, have climbed 65% since the start of the year as buyers sought to move away from Russian sources, Canadian uranium company Cameco said. Similar price increases could come to uranium conversion and the price of U3O8, the concentrate that is the most-traded form of uranium.

"It's still early days, but we are seeing what we believe is an unprecedented geopolitical realignment occurring in the nuclear fuel cycle," said Tim Gitzel, the CEO of Cameco, during a call with analysts May 5. His company is one of the largest global uranium miners, and also operates a conversion plant in Ontario. "The industry now faces the challenge of disentangling its supply chain from dependence on Russian nuclear fuel supplies," Gitzel said.

That disentanglement is being noticed first among utilities that rely on Russia's Tenex for enriched uranium, instead of buying mined uranium, conversion and enrichment separately, Cameco officials said during the earnings call. They expect it to move backward along the supply chain to include conversion and mined uranium soon.

Prices of U3O8 have climbed this year, and are up almost 20% through July 1, according to Platts assessment for current month delivery to Canada.

Cameco has delayed deliveries from a joint venture mine in Kazakhstan until a delivery route that avoids passing through Russia can be confirmed, Gitzel said.

Kazakhstan's Kazatomprom supplies 40% of the world's U3O8, much of which is delivered to Russia for conversion and enrichment or goes by rail to St. Petersburg where it is shipped to the West. Cameco said cargo insurance for such shipments is being canceled, spurring its decision to avoid that route.

Competitors, have said they saw an immediate impact from nuclear operators relying heavily on supplies from TVEL, the Russian fuel supplier that, like Tenex, is a subsidiary of Russia's Rosatom.

US-based nuclear reactor company Westinghouse said it almost immediate began "intensive" discussions with Eastern European nuclear plant operators following the invasion. Those vendors operate Soviet-designed units and often signed agreements to get all their fuel from Rosatom for decades.

For many years, there were no alternate vendors for such reactors, known as VVERs.

Westinghouse started supplying Ukraine's Energoatom, which operates 15 reactors of that design, with nuclear fuel several years ago, but Rosatom has still been a principal fuel supplier during years of conflict between the two countries.

Now, nuclear industry executives say they expect a series of deals such as the announcement last month that Czech utility CEZ will buy nuclear fuel from Westinghouse and France's Framatome, sharply reducing reliance on Rosatom.

"Definitely the current situation in Central and Eastern Europe offers opportunities that will be long-lasting," Westinghouse CEO Patrick Fragman said May 6 during a conference call with analysts. Asked whether, like many opportunities in nuclear energy, the changes would take years to develop, Fragman said this was a case of quicker resolution. Significant actions are expected in the coming months, not years—and that is lightning fast in the nuclear world.