While the 'Three Mine Policy' is not formally on the agenda of the ALP conference in September, clearly uranium will be a contentious issue.
Key members of the ALP and the Government have suggested that the so-called 'Three Mine Policy' is 'irrational', and should be changed in favour of a policy that would allow unrestricted or expanded, uranium mining.
A key argument of those in favour of expansion has always been that Australia is missing out on vast profits by limiting mining. According to these people, the uranium market is always poised for an upswing, and there will be a 'window of opportunity' that we are going to miss.
The window of opportunity argument was made when uranium policy was being considered in 1988. It was made again when the report of the Uranium Policy Review Committee was noted at the 1991 party conference. It is being made now - ERA, who operates the Ranger mine, talks in its company profile of such a window happening in 1996-98, and that we are going to miss out on a lucrative trade.
If purported financial gain is an overwhelming reason to disregard all the weighty considerations of proliferation risk, waste disposal problems, reactor safety, and local environmental impact from mining in favour of a policy of extended mining - then that financial gain should be both real, indubitable, and massive. Given all the controversy associated with uranium mining, and the very real concerns that attach to it, the slightest doubt or risk that the purported benefits may be lesser than advertised is reason enough not to allow an expansion to take place.
It is therefore quite disingenuous to argue as some do, that on the one hand we should scrap or alter existing uranium policy because we are missing out on a lucrative trade, while at the same time arguing that economic and market considerations are 'not relevant' to party policy - and that the industry itself, not the party or the government should be left to assess the market.
Friends of the Earth of course, would oppose the mining of uranium in Australia as would other environment groups, no matter what the short-term economic benefits.
We cannot ignore that our opponents' arguments in favour of mining are economic and market-based, and that over the years prediction after prediction has been made that this country is about to make its fortune in a uranium boom - or would be doing so if it weren't for irrational limitations placed on expansion of the industry in response to the emotional concerns of greenies. Yet the cold fact is that the uranium market has not only failed to take off as predicted by the industry - it has steadily deteriorated.
Friends of the Earth has already provided detailed evidence to the Industry Commission Inquiry into Minerals and Mineral Processing, and three times to the ALP's Uranium Policy Review Committee. In this evidence we pointed to the parlous state of the uranium market and to the likelihood that it will continue to be depressed. Others, notably Dr. Ciaran O' Faircheallaigh for Greenpeace, have made similar arguments.
Another furphy that is often paraded is that the only decision that can legitimately be taken by the Party at a policy level is a blanket decision to mine or not to mine, and if a decision is taken to mine, (presumably driven by an economic assessment that the market justifies it), then the number of mines, which mines, and the conditions under which mining takes place are not matters for policy. It has been put repeatedly that once a decision is taken that some mining - any mining - is OK, then the rest should be left up to the market. A decision to mine is thus seen as a decision for unlimited mining, and the simile 'you can't be just a little pregnant' is often used.
This is far from true. Back in 1977, the Ranger Inquiry endorsed the idea of 'sequential development', in effect a 'one mine at a time policy' based on minimising the local environmental impact of mining. The current policy, the 'Three named mine policy', is a variety of limited mining, and is as such perfectly consistent.
The Three Named Mines Policy is historical in origin, and came about because in 1983 the newly elected ALP was faced with the fact that the Ranger, Nabarlek, and Roxby Downs operations were already there when a government - committed to phasing out uranium mining - came into office. The intention was therefore to limit mining and ultimately phase it out. A major consideration for those who framed the TMP was the loss of jobs that closure of these operations would entail. This is no longer a consideration in the case of the Nabarlek since mining ceased there some years ago when the orebody was worked out.
Naturally FoE would prefer a policy of no uranium mining, and works actively to achieve this end. However, the number of mines is importance, not a matter of indifference, as is the regulatory regime under which mining takes place.
Given all these considerations, it is relevant to review the state of the nuclear power industry, uranium supply and demand, and the economics of mining.
THE NUCLEAR POWER INDUSTRY
Uranium demand depends on the fate of the nuclear power industry. Growth in the nuclear power industry has been slowing for a good many years, and predictions as to its future growth have been slashed over time.
In 1983, the OECD predicted that non-communist (WOCA) nuclear capacity in the year 2000 would be 504-558 GWe (Giga Watts electrical, in that the total power output of a reactor is usually about three times the electricity produced). Australia's total electrical generating capacity is 35 GWe. By 1990, the OECD had slashed that prediction to 327-337 GWe. Another forecaster, NUKEM, slashed its predictions to 329 GWe for the non-communist (WOCA) world in the year 2000.
However, even this NUKEM forecast was considered by FoE to be too high, as it included a number of plants in Finland, Belgium, Argentina, Taiwan, South Korea, and Japan, on which construction had not even been started in 1990, and for some of which, orders had not yet been placed. A number of these plants (e.g. the Finnish one) are now officially cancelled. FoE suggested a year 2000 WOCA figure of only 302 - 312 GWe.
Even this lowest number doesn't take into account the plants that will be decommissioned in the UK and the US. As of June 1993, 16 plants of 4.3 GWe capacity had been shut down in the US. By the year 2000, a further 10 plants will have exceeded their 30 year design lifetimes. In the UK, 4 reactors of 0.8 GWe have already been decommissioned, and 20 plants will have exceeded the 30 year design lifetime by 2000. In contrast, for the UK, only one plant is under construction (Sizewell-B), and in the US, 5 plants. These 5 US plants have been under construction since 1974 - so they are hardly replacements for decommissioned capacity.
France has shut down 9 reactors so far, and another 3 will have exceeded a 30 year lifetime by 2000. In Germany, 9 plants are shut down, and a further 3 will be over 30 years old by then. Even in Japan 5 reactors will be at or near 30 years old, while 1 is already shut down. [Nuclear Engineering International 1994]
Worldwide, a total of 60 power reactors will be more than 30 years old, at the end of their usual design lifetimes by 2000. By 2005, the capacity of reactors being taken out of operation will most likely exceed the capacity of new reactors coming on line.
Looking at the nuclear industry as it stands today, and at its real as distinct from hopeful, growth prospects - figures are now global and include CIS and Chinese capacity:
As of October 1993, global operating nuclear capacity consisted of 441 power reactors of 355 GWe capacity, (only 338 GWe according to NUEXCO) - up from 434 reactors in 1989. This represents an increase of only 7 new reactors in a 4 to 5 year period, when previous growth rate had been far higher.
Under construction in Oct 1993 were 54 reactors (45.6 GWe), well down on 1989 when there were 97 reactors (78 GWe) under construction. This means that the total of reactors both operating and in the construction pipeline has actually fallen from 531 reactors in 1989 to 495 reactors, a decline of 36 reactors in five years. It also means that while 54 reactors are now under construction and may reach completion by of before 2000 another 60 will be at retirement age.
The implications of these seemingly abstruse numbers are somewhat ominous. It means that by the year 2000 the nuclear industry will have completely ceased to grow and may have started to decline - as it is already declining in the US and the UK. To look at some of the more significant nuclear programs:
THE US
The worlds largest nuclear generator, 110 reactors and operating capacity of 105 GWe.
Officially the US has 5 units still under construction, but these plants have been a-building for 20 years, and represent not the much a rebirth of nuclear power, but the ongoing result of a construction program started in 1974.
Senior US utility executives surveyed in January this year by Washington International Energy Group were more pessimistic than ever about a rebirth of nuclear power, despite all the optimistic talk about new technologies and advanced reactor designs. Only 37% of those surveyed said that there would be a 'resurgence' of nuclear power, whereas 68% had predicted one in 1992 - 72% said their utilities would never consider ordering a new nuclear plant, and 46% said they did not expect operating licenses for nuclear plants to be extended [Nucleonics Week (NWK), 13 Jan 1994, p2-3].
JAPAN
As of October 93 the country with the highest growth rate in nuclear plant. Japan has 48 operating plants (38.5 GWe) with another 7 (6.9 GWe) under construction. In addition there are 15 plants (16.2 GWe) 'in planning'.
However Japan's own year 2000 targets have been cut down from the 53 GWe forecast in 1989, to current projections of 39.9 GWe in 1995, and 45.5 GWe by 2000.
Of the seven now under construction, one is due on line this year, 3 in 1995, one in 1996, and one in 1997. There is then a gap of about 5 years before the first plant in what is now the 'planned' category will come into operation.
Opposition to nuclear power in Japan is substantial, with public concern centring on the Fast Breeder program and Japan's plutonium reprocessing. There are lawsuits by citizen groups against the Onagawa 1 and 2 plants (No2 is under construction), and against the Takahama plant over unsafe operation with damaged steam-generator tubes. [Nuke Info Tokyo, 39, 40]
SOUTH KOREA
Almost the same size as Japan's construction program. An operating capacity of 9 plants giving 7.6 GWe, and a construction program for 7 plants or 6 GWe. A further 7 are planned. However South Korea, like Japan, is starting to experience opposition to the nuclear industry. This will result, at least, in construction delays - as happened in Japan where cancellations or deferrals of some of the plants are quite likely. South Korea's reactors, both planned and under construction, are all scheduled to enter operation over the period 1995 - 2006. Again, it is likely that this will be stretched out as delays arise both from opposition and construction problems.
RUSSIA
Russia has three reactors now under construction - but 35 planned. However, the Russian nuclear industry is currently unable to pay its operating personnel or afford fuel for its existing reactors. It is doubtful whether the three under construction will ever be completed, let alone 35 more.
INDONESIA
Much has been made by the mining lobby of the opportunities presented by the Indonesian push for nuclear power. It is therefore well to remember that while there has been talk of up to six nuclear plants, Indonesia has yet to place a definite order for even one. Early in 87, five reactor vendors were asked to perform feasibility studies for a 600 MWe reactor under a 'build-operate-transfer' scheme. Proposals have been received from AECL, a Framatome-KWU consortium, and Westinghouse-Mitsubishi. It is significant that Indonesia does not figure on the Nuclear Engineering International plant list, and uranium broker Nuexco specifically discounts the Indonesian program as not definite. Firm plans exist for no more than one plant, for which tenders will be requested in 1995.
FRANCE
Another country often suggested as a burgeoning market for Australian uranium. France currently has 58 operating reactors with a capacity of 61.9 GWe, and 3 more under construction with a capacity of 4.5 GWe - as well as 7 units planned. Yet this is down two plants from 1989. In 89 nuclear electricity comprised 74.6% of French total electrical capacity, a figure that has now declined to 72.8%. At these percentages there is little room for expansion in the nuclear sector. The 3 plants under construction are supposed to enter operation by 1997, while the planned reactors should begin operation by 1999 and 2001, or else have no definite date.
GLOBAL NUCLEAR CAPACITY
Uranium broker Nuexco currently estimates that global nuclear capacity will reach 396 GWe by 2010 - while Nuclear Engineering International estimates a year 2000 capacity of 380 GWe, and a 1995 capacity of 346 GWe. These figures are considerably lower than those from previous projections and represent an average growth of only 1% per year, as compared to 20% per year in the early 1980s. [George White (Nuexco President) 'The Future for Nuclear Power and the Uranium Market', conference paper from 'Outlook 94']
URANIUM DEMAND
These cut-down growth projections for the nuclear power industry have reflected directly in a stagnation in demand for uranium - at the very time when Gordon Bilney and Bob Collins tell us that the window of opportunity exists for Australian producers. Yet even as the growth-rate in the nuclear industry slows to a standstill and the number of reactors in the construction and planning phase continues to drop, uranium producers, not only in Australia but in Canada and the US, continue to pursue ambitious expansion plans. This is especially strange as a glance at industry literature shows those uranium producers in a large number of countries operating existing mines well below capacity with global reactor demand scheduled to remain constant at 60,000 tonnes per year (150million lbs/y) between now and 2010. [White, Op Cit., p 315 Fig 4]
Thus, for Canada, the Cluff Lake and Rabbit Lake projects (2 out of 3 currently operating projects) are operating at 50-60% capacity in spite of being almost the cheapest non-CIS producers in the world. Another 3 projects have recently closed down. In Gabon, the Mounana mine is operating at 50% capacity. Even in Kazakhstan, the 2 mines operate at only 30-40% capacity. South Africa, most operating projects are at 70-80% capacity, but while there are 6 operating projects, there are 6 closed ones. In Niger, two of three projects are operating at less than 50% capacity and one at 60% capacity. In the US, out of 74 producers, only 22 are operating, but only one of those (Rhode Ranch) is at capacity. Others are on standby or at less than 30% capacity. [NEI 1994 Industry Handbook]
Our own Ranger mine operates at less than 50% capacity, and fills about 30% of its sales with uranium bought under a 5 year contract with the Kazakhstan State Atomic Energy and Industrial Corp. (KATEP) and the Tsellinny Mining and Chemical Combine, deliveries from whom are:
"routinely sold under ERA's long-term contracts with spot-related pricing terms in the US and Europe"
Total production at Ranger in 1993 was 1,335 t, well below design capacity. Of 3,558 t sold, 848 t came from KATEP, and 2,250 t from stockpiled production. [Nuclear Fuel, Oct 11 93, p13]
ERA's contract with KATEP goes to 1997, and ERA's sales forecasts include total sales of 3,345 t in 93-94 of which 1,410 t will be from KATEP, 3,146 t in 94-95 of which 1,031 t will be from KATEP, 3,689 t in 95-96 of which 1,161 t will be from KATEP, 4,365 in 96-97 of which 1,169 will be from KATEP, and 4,830 in 97-98 of which 1,019 t will be from KATEP. [Ranger Company Profile, 02/94]
Current short-term uranium prices are at an all-time low, while the spot (short-term) market accounts for a greater and greater percentage of all uranium sales. Due to anti-dumping legal action taken by US uranium producers, a 2-tier pricing system operates.
In August 93, CIS uranium was available in the US for as little as US$6.90-7.10/lb, while US origin uranium was available for $9.75-$10.05/lb. In April 94, CIS origin uranium was still available at US$7.00/lb, while 'restricted' origin uranium was available for US$9.45/lb. Predictions were made meanwhile that there would be a rise in prices consequent on the conclusion of an 'anti-dumping suspension agreement' between US and CIS producers, but the price rise just didn't happen. By June 94, the spot-price was US$9.20-9.30/lb, for non-CIS uranium, and $7-7.20 for CIS material.
An ABARE model predicts that by 1996, spot-prices may rise to US$14.00/lb in 92 dollars, reaching $30/lb by the year 2000. There seems to be no reason to assume this is what will happen at all, unless CIS-produced material vanishes from the market. This is unlikely. In fact, attempts to restrain CIS sales artificially under this anti-dumping legislation have not been successful. Indeed if successful it would also have an impact on Australian and Canadian material. This in itself would open the agreement to challenges under both GATT and NAFTA from both excluded non-US producers, from CIS producers, and from the utilities. Already in Europe, VEW of Germany have sued the European Supply Agency for preventing them from making use of CIS material that is some $4-5/lb cheaper than competing 'western' material.
When looking at these spot-prices it is as well to remember just what costs of production are. According to a report by the Industry Commission [Industry Commission Report No7, Feb 91, on Minerals and Mineral Processing, p577 Attachment 23c] costs of production begin at US$5-10 for Key Lake, then rise to US$15/lb for Ranger and Chinese production, $15-20 for Roxby production, $20-25/lb for Koongarra and Honeymoon production, and $25-30 for Jabiluka production. Yeelirrie production estimated at $35/lb, and $40-45 for Ben Lomond. ERA's Company Profile places CIS production at the very bottom end of the cost spectrum, followed by Canadian and Australian producers. CIS producers last year assured US attorneys in an anti-dumping suit that its costs were well to the bottom of the $5-6/lb range, and insisted that it was profitable for them to sell at $7/lb.
One reason for this should be that their capital costs were incurred many years ago for military purposes, while now both their capital and operating costs are in roubles or other currencies not highly regarded by the money-market.
Attempts have been made to limit the access of CIS producers to both the US and European markets - but these attempts cut across both commitments to free markets and both the GATT and NAFTA agreements. Legal actions by US producers under anti-dumping legislation have resulted in a series of 'agreements' between US and CIS companies, but these are fragile and have yet to produce any concrete benefit for the US uranium industry which was responsible for them in the first place.
In March 94, the US Department of Commerce and Russia's Minatom signed an 'amended anti-dumping agreement' that allowed 6.6 million lbs of U3O8 (uranium oxide or 'yellowcake') and 2 million separative work units (SWU - a measure of enrichment throughput) of Russian origin to be imported into the US in 1994-95 if that material were 'matched' with uranium or SWU 'newly produced' in the US itself. [Nuclear Fuel, 15 March 94, p1]
Initial industry reaction to the amended agreement was one of confusion, and it was widely seen as 'institutionalising dumping to the benefit of US producers'. Australian officials thought of challenging it. As of April this year no decision had been made by Australia whether to mount a challenge, and at the end of April the government was 'still waiting on developments in the NAFTA process'. Australian officials met with US Department of Commerce representatives in June but got little satisfaction, so a challenge under GATT is still possible.
HIGHLY ENRICHED URANIUM (HEU) STOCKPILES
What will make the biggest long-term difference to the market is the disposal of the massive stockpiles of highly enriched weapons-grade uranium in both CIS and US stockpiles that have resulted from disarmament treaties. This material will be diluted from 90% enrichment, down to the 3-4% enrichment required for civil power reactor use. It is also possible that weapons-grade plutonium will be used as 'mixed oxide fuel' (MOX) in power reactors. Though used in Europe and Japan MOX is not used in the US and should be resisted as it causes reactors to become less stable.
A uranium-based nuclear weapon typically contains about 20 Kg of 90% enriched U235. Diluting this down to 3-4% will displace the equivalent of 2 tonnes of U3O8 production.
The first instalment of material from weapons programs was in 1993, when 20 tonnes of HEU from the US's Fernald facility was sold and diluted as 10 million lbs of U3O8 equivalent. This was merely the tip of the iceberg.
In August 92, President Bush said the US had agreed to buy all the low-enriched uranium from the dilution of 500 t of Russian HEU in weapons stockpiles. In addition to this, Russia has another 700 t of HEU that it wants to sell while the US has 600 t surplus to requirements.
There is enough in stockpiles already committed to dilution and sale to keep the global nuclear power industry operating for the next 10 years with no other production.
According to Jean Syrota, chairman of the French nuclear giant Cogema (who have a share in ERA) - under the US and Russian accord (counting both Russian and US HEU) after the first five years 9 tonnes of HEU per year would come onto the market, equivalent to half the current western uranium production and 20% of consumption.
According to Nuexco, this material would begin to enter the market through the US Enrichment Corporation this year, and would continue for the next 20 years. If this happens, there would be little sense in opening up new mines in a free-for-all.
This Russian and US HEU deal took a step towards being implemented by June 94, when two US companies (Nuclear Fuel Services and Allied-Signal) and six Russian enterprises (Ural Electrochemical Integrated Plant, Siberian Chemical Plant, Techsnabexport, Priargunski Mining and Chemical Plant, the Russian Academy of Sciences, and Litintern) together formed a joint venture known as 'MATEK' to blend the HEU to LEU for use in power reactors.
The venture is officially supported by the Russian Atomic Energy Ministry (MINATOM) whose chief, Viktor Mikhailov, wrote to the US vice-president Al Gore, suggesting that MATEK ship up to 30 tonnes of HEU to the US as UF6 or oxide. This was seen as a move to speed up the creation of MATEK - and the implementation of the HEU deal. While this may bode well for future global security it hardly spells happiness for uranium producers or enrichers for the next 20 years.
The transfer of ten tons of HEU from Russia to the US could take place as early as 'autumn 94', i.e. the next 2 months. MATEK wants to push the sale of Russian HEU forward as fast as possible partly for financial reasons, while US enricher USEC wants to stretch the process over 20 years. Not surprisingly MATEK wants the USEC to become part of MATEK. Even when stretched over 20 years, Russian HEU will form over 15% of USEC's total throughput.
Those who consider Australian uranium policy will need to consider not only the effects of the release of massive Russian and US military HEU inventories on medium to long-term market prospects, but will also need to consider the substantial civil inventories that still exist.
The industry would have you believe that civil inventories (stockpiles) are by now largely run down, but this is far from the case. Civil inventories constituted one billion lbs of U3O8 in 1993, with 40% held by utilities and the rest by suppliers.
Most supplier inventories (500 million lbs of the total) are held by suppliers from Eastern Europe and China, while most utility inventories are held by European utilities (109 million lbs) - and Japanese utilities who accumulated it during the 80s, in part as a result of having signed contracts with a series of US producers in a Reagan-brokered trade deal (128 million lbs). The equivalent of over 400 million lbs U3O8, mostly in the CIS and China, is described as 'uncommitted'.
At current rates of uranium production, (90 million lbs/year), and consumption (150 million lbs/year), the shortfall is about 60 million. ERA, in its 94 Company Profile, suggests that stock will become insignificant in 2002. These numbers show that the current shortfall in production could be met from the uncommitted inventory for six years. The shortfall could be met for 8 years from the uncommitted supplier inventories in addition those held by Japanese and European utilities and for 16 years from the total civilian inventory, without counting ex-military HEU. If we do count all the surplus military HEU then all reactor consumption up to 2010 could be met without any uranium being mined anywhere in the world. In other words, if uranium mining worldwide ceased production tomorrow, the nuclear power industry could still supply itself comfortably until 2010.
The uranium industry will continue to produce, and some new projects will ignore market realities and press ahead into production. CIS, Canadian, Chinese, and some US producers will continue to put cheap production onto the market.
IMPLICATIONS FOR ALP POLICY
Not only is a resurgence in uranium markets NOT around the corner, it is even further away than the critics of the uranium industry claimed in 1990. The light at the end of the uranium market tunnel has proved to be the headlight of a Russian locomotive pulling a load of ex-weapons UF6 from Techsnabexport at $7.00/lb.
The state of the uranium market is a legitimate subject for consideration by the ALP in the context of overall uranium policy. It is not by any means the only reason not to mine uranium, and bodies such as Friends of the Earth would oppose uranium mining whatever the state of the market on proliferation, energy policy, waste disposal, reactor safety, and local environmental impact grounds. The long-term market prospects form a part of a cost-benefit argument in favour of mining that is being pushed by elements within the party and the mining companies. If the market benefit arguments are simply not there, and if there is little prospects of them being there till past the year 2010, then there is little point to argue in favour of increased mining. Rather, without substantial economic benefits, there seems to be economic merit in closing down the uranium production we already have.
Opening new Australian uranium production capacity in this situation is thus a recipe for disaster, and those who advocate doing so should be tagged as blind and irresponsible ideologues in the same way the environment movement has been tagged by them for so long.
