Conversion_ is Renewal on the Way_ - Nuclear Engineering International

Conversion: Is renewal on the way?

7 October 2013

13

During the past year, the market for converting uranium ore concentrates (U3O8) to naturaluranium hexafluoride (UF6) was stable relative to the uranium and enrichment marketsdespite some mixed signals. By Eileen Supko and Thomas Meade

The continued pressure from decreased demand as a result of the accident atthe Fukushima site in Japan was counter-balanced by the extended shutdownof a primary converter's conversion capacity. Existing facilities are ageing, butseveral converters are moving forward with investments at both existing andnew facilities, providing confidence that both current and future new demandcan be met reliably.

The Honeywell International Metropolis Works uranium conversion facility inMetropolis, Illinois, which shut down production in mid-2012 to address facilityupgrades required by the US Nuclear Regulatory Commission (NRC), wasgiven permission to restart in July 2013 after extensive upgrades. CamecoCorporation was also granted regulatory approval to expand UO3 productioncapacity at its Blind River refinery as well as a new 10-year operating licence forthe facility.

France's AREVA and Russian converter TVEL are both planning to replaceexisting uranium conversion capacity with new facilities. AREVA's Comurhex IIproject is scheduled to begin operation by 2015, while UF6 production from anew conversion centre at the Siberian Chemical Combine (SCC) is expected tostart in December 2016, replacing outdated conversion facilities at threeseparate sites in Russia. Kazatomprom has also made progress in its quest toenter the ranks of conversion suppliers, following a 2012 agreement withCameco, but for the near-term appears to be focused on building capacity torefine uranium.

In contrast to these positive developments for construction of new facilities,there now appears to be uncertainty in China regarding a nuclear powerindustrial park that was to house uranium conversion, enrichment and fuelfabrication facilities reported to be under development by China NationalNuclear Corporation (CNNC) and China General Nuclear Power Corporation(CGNPC).

Market

Over the past decade, there has been high volatility in the spot marketindicators for conversion services, marked by rapid increases and severedeclines in price. Separate market price indicators are reported for the NorthAmerican and European markets. While the North American market isdiscussed in detail here, the European market price typically contains a modestpremium when compared to the North American price. The price differential inthe North American and European markets is attributed to the mismatchbetween conversion capacity and enrichment capacity in the North Americanand European markets. (Essentially European converters are able to chargehigher prices for delivery of UF6 to European enrichment plants, which alsoneed to utilize feed from North American converters that comes with additionaltransportation costs.)

The North American conversion services spot market price, based on monthlyprice indicators published by TradeTech LLC, experienced slow but steadydecline following the Fukushima accident, bottoming out at $6.75 per kgUduring the first half of 2012, down 44% from the February 2011 value. Followingthe announced closure of Honeywell's Metropolis Works to make upgrades,there was a steady increase in the spot market price indicator to $10.50 per

Conversion: Is renewal on the way? - Nuclear Engineering International http://www.neimagazine.com/features/featureconversion-is-renewal-on-...

1 de 7 19/04/2015 15:17

kgU by October 2012, and it now stands at $9.25 per kgU (31 July 2013). Whilethe decrease in primary production that resulted from the year-long closure ofMetropolis Works helped absorb some secondary market supply, the recentrestart of production there may result in some near-term degradation of marketindicators.

The North American long-term market price has historically been much lessvolatile than the spot market price indicator and, in fact, TradeTech's term priceindicator remained unchanged at $16.75 per kgU for nearly two years, beforedeclining at $16.00 per kgU on 31 July 2013. The term price indicator'sresponse to the primary drivers of the spot price during this time has beenmuted. The term price indicator rose just 8% in the six months following theFukushima Daiichi accident and has not changed at all during the year-longshutdown of primary production at Metropolis Works. While the disconnectbetween the published spot and term market price indicators has decreasedfrom 60% a year ago to 40% today, the large gap between spot and termindicators continues to persist.

It is not unreasonable to expect the price gap to close further, perhaps throughrising spot prices as well as somewhat lower term prices. The lower quantitiestransacted on the spot market have allowed for sudden price changeshistorically, and this will remain the case in the future.

Requirements

Natural (that is, unenriched) UF6 serves as feed material for the uraniumenrichment process to produce enriched uranium product (EUP) - also referredto as low enriched uranium (LEU) - used to fuel light water reactors (LWRs)that power the majority of commercial nuclear power plants throughout theworld.

World requirements under the ERI reference nuclear power growth forecast forUF6 conversion services are projected to increase by 52% between 2012 and2035, from 57 million kgU in 2012 to 87 million kgU as UF6 by 2035. Worldrequirements for uranium conversion in other forms, primarily for use inpressurized heavy water reactors (PHWRs), add another 2.3 to 3.6 million kgUbut do not require conversion to UF6.

US annual requirements are projected to remain in a narrow range between 16and 20 million kgU through 2035 for the reference forecast. Western Europeanrequirements, which were approximately 17 million kgU in 2012, are projectedto decline by as much as 25% during the period 2031-2035. However,requirements for UF6 conversion services in the Commonwealth ofIndependent States and Eastern Europe, East Asia and other regions areexpected to grow by 34 million kgU to 56 million kgU, or 155% between 2012and 2035.

World requirements for UF6 conversion services under the ERI high nuclearpower growth forecast climb to 126 million kgU per year by 2035 -- an increaseof 120% over 2012 requirements. Under the ERI low forecast, world UF6conversion services requirements demonstrate modest growth to 60.4 millionkgU by 2020, but then decline to 53 million kgU by 2035, which is 8% below2012 requirements.

Primary producers

There are four primary commercial suppliers of uranium conversion servicesworldwide: Converdyn (USA), Cameco (Canada, with a supporting facility in theUK), AREVA/Comurhex (France), and Rosatom/TVEL (Russia). CNNC (China)is also discussed due to the substantial role that it is expected to play in thefuture. Table 1, p22, gives a breakdown of each supplier's market share in2012. The other category includes supply by small producers such as Brazil,Argentina and India, and secondary supply.

AREVA subsidiary Comurhex operates facilities at two sites that are involved inthe conversion of uranium to UF6. The Comurhex Malvesi plant convertsuranium into UF4 and uranium metal. The Comurhex Tricastin site inPierrelatte, France produces UF6 from the UF4 produced at Malvesi. In addition


2 de 7 19/04/2015 15:17

to the production of UF6, uranyl nitrate (UNH) produced at the La Haguereprocessing plant is shipped to Tricastin's TU5 facility for chemical conversionto oxide powder. This reprocessed uranium (RepU) can be reconverted intoUF6 and re-enriched into fuel. The Tricastin site also has the capability todefluorinate depleted UF6 and convert it into an oxide form for storage or furtheruse. Comurhex uses a two-step wet conversion process (dissolution;purification; precipitation and calcining - UO3; hydrofluorination UO3-UF4;fluorination). While AREVA's annual UF6 nameplate conversion capacity isapproximately 14 million kgU, it announced in 2011 that it would reduceproduction due to the drop in Japanese requirements. Annual production in2012 is estimated to have been approximately 11 million kgU.

In 2007, AREVA decided to replace its existing uranium conversion capacitywith new conversion facilities at Malvesi and Pierrelatte, the Comurhex IIproject. Construction began in 2009. AREVA reports that Comurhex I isscheduled to shut down in 2015 and Comurhex II will begin phasedcommissioning afterwards, with operation currently scheduled by 2015. Whilethe current target nominal capacity of Comurhex II is 15 million kgU, thefacility's capacity could be extended up to 21 million kgU per year if marketconditions are favourable. Comurhex II will use the same conversion process asComurhex I; however, AREVA has focused its research efforts on improving theperformance of existing processes with an emphasis on facility reliability, cost,reduction in waste volumes, and environmental footprint.

Cameco produces both UF6 for LWRs and UO2 for CANDU reactors (PHWRs).Like AREVA, Cameco utilizes the wet solvent extraction process with somemodifications that allow for recovery of hydrofluoric acid, in order to reduce thevolume of residue generated in the UF6 conversion process.

Cameco operates the Blind River uranium refining facility in western Ontario,which produces UO3 from U3O8. In February 2012, the Canadian NuclearSafety Commission granted a 10-year operating licence for the Blind Riverrefinery and approved expansion of production capacity from 18 million kgU asUO3 to 24 million kgU. Equipment upgrades are under way to increaseproduction capacity to the new licensed limit. The UO3 produced at Blind Riveris transported across Ontario to Cameco's conversion facility at Port Hope,Ontario, which is located 100 km east of Toronto.

Port Hope has a licensed capacity of 12.5 million kgU as UF6 per year and 2.8million kgU as UO2 per year. UO3 is also transported to the 6 million kgUSpringfields Fuels Ltd. (SFL) facility in the UK. Cameco has a toll conversion(UO3 to UF6) agreement with SFL, under which it ships approximately 5 millionkgU as UO3 per year to SFL for production of UF6. Based on the current marketfor UF6 conversion, Cameco has stated that it does not anticipate an extensionof the SFL toll conversion contract beyond 2016.

Another recent development is an October 2012 memorandum of agreement(MOA) that was signed between Cameco and Kazatomprom. As part of theMOA, Cameco has agreed to participate in the construction and operation of auranium refinery in Kazakhstan with capacity to produce 6 million kgU as UO3annually, with joint ownership between Cameco and Kazatomprom.Construction is expected to begin by 2018.

The MOA also provides Kazatomprom with alternatives associated withproduction of UF6, including a five-year option to licence Cameco's uraniumconversion technology for construction of a UF6 conversion facility inKazakhstan. Another alternative provided in the MOA is a provision in whichCameco would agree to negotiate with Kazatomprom for a conversion servicesagreement of up to 4 million kgU annually; and/or provide Kazatomprom with anopportunity to acquire a one-third interest in Cameco's Canadian conversionfacility for a three-year period. No firm dates are associated with the UF6production alternatives provided in the MOA. Feasibility studies must first becompleted, and Cameco must receive government approvals associated withthe potential transfer of Cameco's technology.

ConverDyn, established by affiliates of General Atomics and Honeywell in 1992,is responsible for all marketing and contracting on behalf of Honeywell's


3 de 7 19/04/2015 15:17

Metropolis conversion plant. While the Metropolis facility has a nameplatecapacity of 15 million kgU as UF6, it has not operated consistently at thatproduction level. Unlike the Comurhex and Cameco conversion facilities thatuse a wet solvent extraction process for UF6 production, Metropolis uses a dryfluoride volatility conversion process. The process steps are preparation,reduction, hydrofluorination, fluorination and distillation. Annual productionlevels have averaged less than 10 million kgU recently, and at timessignificantly lower due to plant shutdowns.

Over the past decade, the Metropolis Works facility has experienced labourproblems as well as licensing issues with the NRC. In May 2012, afterdiscovering damage to certain equipment in the Metropolis facility, Honeywelltemporarily suspended production and laid off workers at the site. At the time,Metropolis was about to enter an annual maintenance outage. Honeywell waspoised to restart the facility in mid-2012 after the outage, following a thoroughinspection and investigation into the cause of the damage, but was unable to doso as a result of an inspection by the NRC. In July 2012, Honeywell announcedthat it was evaluating a series of upgrades to the Metropolis Works facility as aresult of an NRC inspection that focused on preparedness for extreme naturaldisasters such as significant seismic events and tornados. NRC defined thescope of the upgrades in a Confirmatory Order to Honeywell in October 2012. InMay 2013, Honeywell submitted a notice to NRC indicating its intent to resumeoperations at the Metropolis Works facility, and received NRC authorization tobegin production of UF6 in July 2013. According to a recent Honeywellfactsheet, the company has spent nearly $150 million since 2006 on capitalinvestments at Metropolis Works, including the recent upgrades. Annualproduction from the facility is expected to return to the 12 million kgU rangeonce the plant is back to full production levels. However, Honeywell has notannounced its expected production levels in the near term. Converdyncontinued to deliver UF6 to its customers from inventories in 2012 and 2013and reportedly deferred deliveries to some customers until production could berestarted.

Rosatom subsidiary Joint Stock Company TVEL is currently responsible forproduction of UF4 and UF6 at three facilities. UF6 production occurs at facilitiesoperated by the Joint Stock Company (JSC) Angarsk Electrolysis Chemical andCombine (AECC), the Siberian Chemical Combine (SCC); and JSC ChepetskMechanical Plant (CMP) produces UF4. AECC and SCC receive UF4 feedstockfrom the CMP. TVEL receives uranium concentrates from ARMZ Holding andforeign mining enterprises for conversion to UF6. While nameplate productioncapacity of the three facilities is 25 million kgU per year, according to TVELofficials, the current capacities of the three facilities are approximately 10 to 12million kgU per year. Actual production over the past several years is estimatedto have been about 9 million kgU. A substantial portion of the 'conversionservices' delivered in the past has been comprised of the natural uranium feedequivalent from downblended HEU.

TVEL is in the process of modernizing its conversion production capability.Rosatom plans to invest approximately 12 billion rubles ($400 million) forconstruction of a conversion production centre at SCC. The planned investmenthas increased by 60% over initially-announced estimates. Public hearings wereheld in May 2013 and the development of design documentation is in process.The new facility is expected to improve the long-term competitiveness of theconversion component of nuclear fuel, reduce production costs, and reducewaste. All uranium conversion activities will be undertaken at the new centreand TVEL plans to decommission the conversion facilities at AECC and CMP inthe future. The production of UF6 is expected to begin in December 2016.According to recent reports, the first stage of the facility will have an annualcapacity of 12 million kgU per year, with the possibility of expansion up to 20million kgU per year. The facility will utilize a new dry technology.

Rosatom does not generally sell conversion services alone, but has for someyears been exporting EUP containing equivalent conversion services toWestern Europe, the US, and East Asia.

China National Nuclear Corporation oversees all aspects of the Chinese


4 de 7 19/04/2015 15:17

government's military and civilian nuclear programmes. Its conversion plant atthe Lanzhou Nuclear Fuel Complex has an annual capacity of 3 million kgU asUF6. CNNC conversion capacity is dedicated to meeting domesticrequirements, which already exceed current indigenous conversion capacity.CNNC is expected to start expanding its domestic conversion capacity aroundthe year 2015, when its domestic requirements are set to increase rapidly.CNNC annual conversion capacity is projected to reach nearly 8 million kgU by2020 and 24 million kgU by 2035.

In May 2013, there were press reports that CNNC and CGNPC were planning tobuild a $6 billion nuclear power industrial park that would include uraniumconversion, enrichment and fuel fabrication facilities. The industrial park wouldbe operated by CGNPC subsidiary China Nuclear Fuel Element Company atHeshan in Guangdong province, with a projected operation date of 2025 and anameplate capacity of 14,000 MTU. However, according to recent reports, localofficials in Guangdong province have stated that they will not seek approval ofthe industrial park after protests by local citizens during a public commentperiod associated with siting the planned facilities. However, there have notbeen any official statements issued by either CNNC or CGNPC regarding thestatus of the project. Despite the recent uncertainty over location, there is littledoubt that new conversion capacity will be constructed in China in order to meetthe growing demand for conversion services in the country.

Secondary sources of supply

Substantial secondary sources of UF6-equivalent material are currentlyavailable in the world. Secondary sources include the natural uranium feed andconversion services equivalent of the Russian HEU; US Department of Energy(DOE) natural uranium, HEU and high assays tails; the uranium resulting fromunderfeeding by the enrichers; plutonium recycle and uranium recycle; andupgrade of tails in Russia using its surplus enrichment capacity. Thesesecondary supplies amounted to approximately 23 million kgU per year during2012, and are expected to remain at this level in 2013. Following the conclusionof the US-Russia HEU Agreement in 2013, these supplies are expected to fallto an average of 15 million kgU per year during the period 2014 through 2022;and then further decrease to an average of 10.5 million kgU per year through2035. The future contribution from secondary supplies is seen to be equivalentto that of a single, major conversion facility. However, it should be recognizedthat there is significant uncertainty in the forecasts of secondary suppliers,particularly in the level of enrichment underfeeding and tails upgrading.

These secondary sources do not include the strategic uranium that is beingheld by owners and operators of nuclear power plants and the commercialsuppliers of nuclear fuel materials and services. Release of commercialinventories of conversion services is not expected, although concern remainsthat Japanese utilities may decide to release material in the future.

Supply arising from tails via underfeeding at both Western and Russianenrichment plants, as well as upgrading of Russian stockpiles of tails,comprises a significant portion of conversion secondary supply after 2013 (seeFigure 1). Additional quantities of relatively high-assay DOE enrichment tails inthe form of UF6 could become a source of equivalent conversion services in thelonger term. Quantities and timing are subject to economic and policyconsiderations, but equivalent conversion services arising from there-enrichment of DOE tails material is included in the DOE secondary supplyshown in Figure 1. DOE's recent request for offers covering high-assay tailsprovides further insight into its schedule for released of DUF6 into thecommercial market in 2019 and beyond, and is consistent with DOE secondarysupply projections used in this article.

Market outlook

Primary production met approximately 67% of 2012 requirements, andsecondary supply, which includes the feed component of Russian HEU,enrichment tails upgrading, and government stockpile draw-down was morethan adequate to meet the remainder of requirements. In fact total supply, bothprimary and secondary, exceeded 2012 requirements by 7%. This represents a


5 de 7 19/04/2015 15:17

reduction in the supply-to-requirements situation compared to 2011 whenprimary and secondary supply exceeded requirements by 20%. The reduction inthe ratio of supply to requirements is a result of lower production at theMetropolis plant due to its year-long shutdown. Primary and secondary supply isexpected to exceed requirements by 14% in 2013, with the restart of productionat the Metropolis plant in mid-2013. It is projected that total primary andsecondary supply will be able to meet reference forecast requirements throughapproximately 2024. However, starting in 2025 a small deficit of supply relativeto world requirements arises. The deficit averages 1.0 million kgU per yearbetween 2025 and 2030, which is about 1% of average annual requirementsduring that time. The deficit grows to an average of 4.5 million kgU per yearbetween 2031 and 2035, or about 5% of average requirements.

Figure 2 provides a graphical illustration of the relationship between projectedsupply and requirements through 2035 for ERI's reference nuclear powergrowth forecast. The world's sustainable primary production capacity isexpected to rise from 38 million kgU as UF6 in 2012 to 57 million kgU in 2015,and then increase gradually to 76 million kgU by 2035. The increase in primaryproduction capacity is largely due to the assumed increase in UF6 productionby CNNC to meet a substantial portion of its internal requirements, consistentwith its policy of being largely self-sufficient. As previously discussed,secondary supply, in all forms, together with recycle, is collectively expected todecline between 2014 and 2025 and then stabilize at about 50% of currentlevels. The requirements for UF6 conversion services are forecast to steadilyincrease to 87 million kgU by 2035.

Note that the supply shown in Figure 2 does not include the potential 6 millionkgU expansion of AREVA's new Comurhex II plant, nor potential UF6conversion capacity from Kazatomprom. It also does not include operation ofthe Springfields conversion plant past 2016. Comurhex II could be expandedwhen required by market conditions, which appears to occur in the 2022-2025time period. A decision to extend operation at Springfields past 2016 appears tobe more difficult, as supply looks to be adequate in the years immediatelyfollowing its currently expected shut down. If requirements are higher than ERI'sreference forecast, then the introduction of the new AREVA (and Kazatomprom)conversion capacity would need to be accelerated, but the market signalsneeded to extend Springfields operations may not arrive in time.

Eileen Supko ([email protected]), principal, and ThomasMeade ([email protected]), principal, Energy ResourcesInternational, Inc, 1015 18th Street, NW, Suite 650, Washington, DC 20036,USA.

Figure 1: Projectedsecondary supply ofequivalent conversionservices


6 de 7 19/04/2015 15:17

Figure 2: Projectedconversion servicessupply andrequirements

Metropolis Works

UO3 arrives at PortHope

Comurhex II Malvésiconstruction site,France

Nuclear Engineering International is a product of Global Trade Media, a trading division of Progressive Media Group Limited. © 2015, All Rights Reserved.

Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy.Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unlessyou have disabled them.


7 de 7 19/04/2015 15:17

Conversion_ is Renewal on the Way_ - Nuclear Engineering International

Documents

Transcript of Conversion_ is Renewal on the Way_ - Nuclear Engineering International