Supply excess for another

摘要

All of the front-end nuclear fuel markets are in state of over-supply, and the enrichment services market is no exception. When the enrichment market was characterized by significant capacity utilizing gaseous diffusion technology, some supply flexibility existed, as the large variable costs for electric power allowed gaseous diffusion plants to adjust output in response to demand. Now that 100% of primary enrichment supply uses centrifuge technology, that flexibility has been lost. The modular nature of centrifuge technology allows it to be exceedingly efficient when supply capacity growth is called for, but the technology is relatively inflexible when capacity exceeds demand. Centrifuges operate at full capacity until they are permanently retired, so output from existing supply is fixed regardless of market demand. Since the technology has high capital costs, but low cash operating costs, competitive prices in a market characterized by over-supply are much lower than prices needed to support the capital investments required in a market where supply growth is needed. Over the past few years, the enrichment market has devolved from a market characterized by new supply (both for GDP replacement and for anticipated demand growth) to a market where plans for expansion or new plants have been shelved and suppliers compete for the scraps available from highly committed customers with stagnant demand. The ability to underfeed and refeed existing tails material does provide a relief valve of sorts for excess enrichment supply, but to the detriment of the uranium and conversion markets. The resulting downward pressure on uranium prices limits the financial benefits of redirecting enrichment supply to uranium production as a result. Furthermore, the current excess in enrichment supply cannot be fully absorbed by redirection to uranium production.