Uranium has become the subject of competition – Newspaper Kommersant No. 46 (7491) dated 03.20.

The world’s largest uranium producer, Kazatomprom, doubled its net profit to $1 billion in 2022 amid rising global uranium prices. Prices for raw materials for nuclear fuel began to rise after the start of Russian military operations in Ukraine: the average annual spot price of uranium increased by 41%, reaching $50 per pound. Prices are rising as buyers want to reduce dependence on Russian supplies, Western uranium producers say. The situation is exacerbated by the return of popularity in the world of nuclear energy.

Kazatomprom (75% of the companies are owned by the Kazakh state fund Samruk-Kazyna) at the end of 2022 showed the strongest financial results in recent years. The group’s consolidated revenue grew by 45% year-on-year to 1 trillion tenge ($2.17 billion at the average annual rate of the National Bank of Kazakhstan). The lion’s share of income (85%) comes from the sale of uranium oxide (U3O8). Adjusted net income more than doubled, exceeding 465 billion tenge ($1 billion), adjusted EBITDA – by 80%, to 631 billion tenge ($1.37 billion).

Kazatomprom is the world’s largest uranium producer, accounting for 42% of total production. At the same time, the cost of obtaining uranium in Kazakhstan remains one of the lowest in the world. Foreign companies, including Rosatom, Canadian Cameco and French Orano, own stakes in a number of Kazatomprom’s fields. In 2022, the total production of Kazatomprom amounted to 21.2 thousand tons of U3O8, of which 9.85 thousand tons came from foreign partners. Of its 7 thousand tons of uranium per year (15% of the world market), Rosatom produces more than 60% in Kazakhstan through five joint ventures with Kazatomprom.

Kazatomprom’s income from the sale of U3O8 increased by 40% due to a sharp increase in world prices for uranium. Quotes began to increase since March last year after the start of Russia’s military operations in Ukraine. First, European and American buyers of nitrous oxide began to fear logistical problems (uranium is transported through Russia to the port in St. Petersburg, from where it is sent to the EU and the USA), and then the market began to fear the imposition of sanctions against Rosatom.

The average annual spot price of a pound of nitrous oxide in 2022 increased by 41% ($49.81), while the price in long-term contracts increased by 35% ($49.75). The selling price of Kazatomprom averaged about $43 per pound for 2022 (an increase of 31% year-on-year). However, due to higher prices for raw materials and materials, in particular for sulfuric acid, against the backdrop of high inflation, the cost of uranium production also increased, to $16.19 per pound of U3O8 (including capital costs).

The global nuclear industry is seriously dependent on Russia: the country’s share in uranium supplies is 14%, in uranium conversion services (converting uranium to UF6) – 27%, in uranium enrichment – 39%, according to the latest Cameco report. Under the conditions of geopolitical uncertainty, energy companies began to more carefully assess the risks of supply throughout the entire chain of nuclear fuel production. Buyers are looking to get away from Russian contracts, so Cameco expects further increased competition for the provision of services for the extraction and processing of uranium products. But to expand the capacities of new players, investments are required, which can be provided only by signing long-term contracts.

The cost of uranium is also affected by the growing interest in nuclear generation against the backdrop of the energy crisis. At the end of 2022, nuclear energy is again assessed as a promising low-carbon and stable source, notes Natalya Velichko from Kept. The dynamics of uranium prices is now mainly determined by fundamental factors, the impact of speculative trading is minimal, she believes.

Analysts agree in expecting further growth in uranium consumption: due to the energy crisis, European and American companies are not yet considering the possibility of closing nuclear power plants, China plans to commission new capacities, and Japan is expected to resume the operation of nuclear power plants. “At the same time, the market may face a shortage of raw materials,” says Natalya Velichko. “The negative trend is set by the geopolitical situation, logistical and technological restrictions on supplies from other regions.” In her opinion, the market will return to balance no earlier than the end of 2023.

Polina Smertina