Kazakhstan has been the world’s largest uranium producer since 2009, but 2012 figures show it has beat its own production record, providing 37% of the world’s uranium last year--BUT uranium prices are still in a pinch even though the market should never have predicted that nuclear power was on its death bed.
Kazatomprom, the state-run nuclear company, says the country increased production year-on-year from 19,400 tons in 2011 to 20,900 tons in 2012.
The primary markets for Kazakh uranium are Eastern: China, Japan, India and South Korea, but Western investors are increasingly interested.
The country is also planning to take advantage of the uranium largesse by building another nuclear power plant, which is just now entering the proposal stage. Its latest endeavor is to produce locally all materials required for the nuclear fuel cycle.
International nuclear company Westinghouse (along with Canadian and French players) has played a key role in the past years in Kazakhstan’s uranium sector. Kazatomprom purchased a 10% share in Westinghouse in 2007. That same year, Canada’s Cameco Corporation signed an agreement with Kazatomprom to examine the potential for a uranium conversion plant, under the auspices of a joint venture called Ulba Conversion LLP. A year later, France’s Areva mining giant hit the scene with a strategic agreement with Kazatompromo. In 2009, the two created a joint venture, IFASTAR, with Areva holding a 51% stake.
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Kazakhstan now has the investor advantage over top exporters Australia and Canada: the industry is rapidly expanding, the uranium is high quality and the mining process itself is comparatively cheap. Without even undertaking any more exploration, Kazakhstan is said to have enough reserves to last for 70 years.
All of this makes Kazakhstan the OPEC of uranium, so what does its production success mean for prices?
Prices were low particularly in 2008 and 2009 because Kazakhstan’s was ramping up production so fast—fast enough to earn it the top spot. Since then, production has stabilized for the most part, despite the record for 2012.
What will 2013 see in terms of pricing? Kazakhstan still plans to boost output further, to a goal of 25,000 tons annually, so we could see more depression of prices this year and next. However, Kazakh mining authorities have pledged to put new projects on hold and keep production at the current level if prices remain at their current lows—for now.
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Right now uranium prices are at a delicate spot.
While everyone expected the demand for nuclear power (and hence, uranium) to take a dive after the March 2011 Fukushima disaster, that has not been the case. Uranium prices took an immediate dive on fears that nuclear was dead. In fact, they dropped 30%. It hasn’t done too well since then, either.
But I think we can safely say that this fear was unfounded. Here’s a more realistic picture of nuclear power’s future: Japan’s recent decision not to abandon nuclear power (it can’t afford to). China is also flirting with more nuclear and plans to build 100 new reactors over the course of the next 20 years (right now it’s only got 15). Across the world, 160 new reactors are already in the planning stage; another 65 already being built; well over 300 in the proposal stage.
Demand is set to rise with a momentum that may outpace current production, which means prices will rise. Nuclear power and uranium are hardly dead in the water and 2013 should see a major investment revival.
By. Charles Kennedy of Oilprice.com