By Avi Salzman
Escalating tensions between Russia and the United States have wide implications for global security. Ukraine fired long-range missiles at Russia this week, after the U.S. approved plans to do so. Russian President Vladimir Putin said the move has crossed a red line, and changed Russia's nuclear doctrine to allow for nuclear strikes in response to attacks with conventional weapons.
The tensions are also impacting an important source of U.S. electricity: nuclear power plants. A few days ago, Russia pulled the export license for the company that sends enriched uranium to the U.S. for use in nuclear reactors. For now, it looks like all shipments of enriched Russian uranium, which accounts for 40% of the global supply, are stalled. It's not clear if or when they'll be back again.
Uranium prices and stocks of uranium miners have spiked on the news. U.S. miner UEC is up 13% and Canadian miner Cameco has jumped 8.6% since Russia decided on Nov. 14 to halt shipments. But shares of Centrus have fallen 9.7% since that date.
Other kinds of nuclear companies could also face challenges.
Citi analyst Arkady Gevorkyan wrote in a recent note that a shortage of certain kinds of enriched Russian uranium "could pose significant risks for a ramp up of small modular reactors in the US." Small modular reactors, which are designed to be cheaper to build than conventional large reactors, don't yet exist in the U.S. -- but companies like Oklo and Nuscale are working on them.
The Russian ban doesn't mean that America's 94 existing nuclear reactors will suddenly stop working immediately. They have supplies of enriched uranium stored up. The future of U.S. nuclear plants could be in jeopardy, however, if imports from Russia are banned indefinitely and the U.S. can't develop a domestic uranium supply chain.
Centrus, which is based in Bethesda, Maryland, said on Monday that it had received notice from Russian uranium exporter Tenex that Tenex's license to export uranium to the U.S. had been revoked by the Russian government. While Tenex is trying to get the license reinstated, "there is no certainty whether such licenses will be issued by the Russian authorities and if issued, whether they will be issued in a timely manner," Centrus said in a regulatory filing.
The news isn't entirely surprising. The U.S. technically banned Russian uranium earlier this year, but had allowed for waivers of the ban for years with the understanding that nuclear reactor operators had few other options.
While uranium itself is relatively abundant, there are just a few providers of enriched uranium, which is produced by converting uranium oxide into a gas and then using centrifuges or other devices to increase the useful percentage of uranium. America has almost no domestic enrichment capacity anymore, relying largely on European and Russian suppliers. For about 30 years, Russia has capably filled the need, but that's no longer a given. The price of enriching uranium has gone up roughly 300% since the Russia-Ukraine war started, says John Ciampaglia, CEO of Sprott Asset Management, which owns uranium exchange-traded funds.
"It does put some utilities at heightened risk," he said in an interview with Barron's. "It's kind of ironic to us that the world's largest consumer of uranium's entire fuel supply chain is largely dependent on foreign countries -- some of which are allies, some of which are not."
Ciampaglia thinks Centrus could have to use force majeure, a legal method meant to stop enforcement of a contract's terms, in its contracts with utilities. In response, Centrus spokeswoman wrote in an email that "we will be in communication with our customers whose pending orders may be affected and are assessing actions to mitigate adverse impacts."
One utility that relies on enriched Russian uranium is Constellation Energy, which owns more nuclear plants than any other U.S. operator. Constellation spokesman Paul Adams said that the company has been expecting this move since the start of the war, and has thus stockpiled "enough fuel to power our operations into 2029 and have entered into contracts for these services far into the 2030s."
The U.S. government is helping fund companies like Centrus to expand enrichment capacity in the future, a process that utilities clearly hope takes hold soon. Centrus is starting to push ahead: the company announced on Wednesday it will invest an additional $60 million in expanding its enrichment capacity in Ohio over the next 18 months.
"It is critical to our national security and our energy security that we move immediately to revitalize our domestic uranium conversion and enrichment capabilities to ensure an uninterrupted supply of fuel for nuclear plants that serve as the nation's largest and most reliable supply of carbon-free electricity," Adams wrote.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 20, 2024 12:13 ET (17:13 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments