A gluts of uranium
WASHINGTON, DC
TAKE three great forces sweeping through businesses today—the end of the cold war, privatisation and worldwide competition. Turn them loose on one of the world’s most rigid industries, uranium enrichment, which had $3.5 billion in revenues last year. Then watch the commercial chain-reaction.
On December 1st Russia will supply America with the first of four consignments of enriched uranium, worth $115m in total. This contract is a consolation prize for Russian exporters, who have reluctantly agreed to restrain exports after American producers complained in the late 1980s about Russian "dumping" of uranium into an unexpectedly glutted market. However, in another recent agreement, worth $12 billion over 20 years, Russia will dilute 500 tonnes of highly enriched uranium from nuclear warheads into 15,000 tonnes of low-enriched uranium for fuelling American commercial power stations.
This second deal is still awaiting the approval of both the Russian parliament (now dissolved) and its Ukrainian sister. The former Soviet Union is rumoured to have 200,000 tonnes of the metal in stock—equivalent to four years’ western demand at a time when nuclear power stations have gone out of vogue. Customers have already picked up the message that uranium is no longer a scarce commodity. Contract periods on the world market have shortened dramatically, from 30 years to five years or less, and a ".pot market" has developed in which excess stocks are traded.
The most exposed company is the United States Enrichment Corporation (usEc), which was hived off from the Department of Energy in July. Its predecessor, the Uranium Enrichment Enterprise, which was the West’s near-monopoly producer until the 1980s, had revenues of $1.5 billion last year. USEC claims to supply 90% of the American market and nearly
half of the world market (excluding China). By October 1994 USEC is due to submit a privatisation plan to Congress.
Many of USEC's customers have announced that they will be looking elsewhere once their current contracts end— hardly surprising since the American government was charging 3040% more than the competition. William Timbers, a Wall Street banker who was hired to oversee USEC’S weaning from the Department of Energy, wants to replace the firm’s take-it-or-leave-it contracts with deals tailored to each customer. He sees USEC as "a nuclear-fuels business", not just a uranium-enrichment business. He thinks that it might diversify into the disposal of nuclear waste.
President Clinton told the United Nations last month that America wanted a worldwide ban on production of plutonium and highly enriched uranium. Will he also order that stocks of weapons-grade uranium should be turned into commercial fuel, adding a further source of supply? The question for Mr Timbers is why America should be enriching uranium at all.
Source : The Economist October 30th 1993
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