Uranium Import Brake

Last week several U.S. Senators introduced legislation aimed at protecting national security interests.  Entitled the ‘Russian Suspension Agreement Extension Act of 2020’, it extends and expands limits limiting imports of Russia uranium through 2040.  Also called Senate Bill 4694, it could also help U.S. uranium mining companies through some administrative changes.  The legislation follows negotiations with Russia’s State Atomic Energy Corporation Rosatom. 

Rosatom dominates the world uranium market, commanding about a one-third share of the global enrichment services and almost a fifth of the nuclear fuel market.  U.S. uranium producers would like to elevate their competitive position  -  not an easy task in a sector where purchases are by negotiated contracts and prices are determined on a global stage.

If passed Senate Bill 4694 would lower the limit on Russia imports from the current 20% of U.S. enrichment demand to 17%.  By the year 2028, the limit would be reduced to 15%.  The legislation closes a loophole that currently allows Russian exporters to sidestep U.S. import limitations by exchanging uranium enriched in Western European plants for natural uranium concentrate from a U.S. customer.    The legislation also changes the allowed sales mix to limit the amount of the Russia imports that can be for uranium concentrates and conversion components. 

These could be major steps forward for the U.S. uranium converter, Honeywell International’s (HON:  NYSE) uranium conversion plant in Metropolis, Illinois.  Honeywell recently applied for and received renewal of an operating license from the U.S. Nuclear Regulatory Commission.  The license gives Honeywell another 40 years to convert uranium ore concentrates also called yellowcake into hexafluoride, the mineral component that is enriched for nuclear power reactors.  The Illinois plant has been idle since 2011, when a tidal wave caused a major accident at the Fukushima Power Plant in Japan.  Honeywell engineers have been looking for better market conditions ever since to restart operations.

Enrichment companies may also be interested in the new agreement.    Urenco Group through its subsidiary Urenco USA in Eunice, New Mexico also provides enrichment services.   Urenco also operates enrichment plants in Germany, Britain and the Netherlands.  It commands almost a third of the global market for enrichment services.  Urenco is a consortium of companies owned by the United Kingdom, The Netherlands and Germany.

Centrus Energy Corporation (LEU:  Nasdaq) also contracts with the U.S. Department of Energy to enrich converted uranium components.  It relies on Russia’s TENEX for supplies of ‘separative work units’ that is one of the components of Centrus’ primary product, low-enriched uranium (LEU).  LEU is sold to nuclear power producers.  Centrus has indicated it intends to avoid cost increases from importing Russian supplies but using its Russia-sourced inventory for customer who use it in foreign reactors.  Centrus also has a supply agreement with France’s Orano Group that could begin in 2023.  The six-year agreement could reduce pressure on Centrus to deal with TENEX supplies.

 

Centrus is the only privately owned entity involved uranium enrichment.  LEU provides minority investors one of the few opportunities to take a stake in the nuclear power industry at this link in the supply chain.  The next post takes a closer look at Centrus.    

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.