THE ECONOMICS OF MINING AND EXPORTING URANIUM
The Committee's terms of reference did not expressly embrace the economics
of uranium mining for Australia. This aspect, however, has not been
entirely excluded from the inquiry.
In the first instance, expansion of the present mines and potential
development of new mines is based on a view that there is a strong likelihood
that demand for uranium, not least in Asia, will support further mining
in Australia.
Secondly, a financially viable uranium mining industry is important
in ensuring that the high standards - environmental as well as health
and safety - are fully and properly met.
Thirdly, the danger of diversion of nuclear materials to unacceptable
purposes especially of a military character is substantially minimised
so long as supply of uranium approximates the level of demand for uranium
for such purposes as electricity generation.
There is thus a strong security as well as environmental interest in
the financial viability and relative stability of the uranium market.
Opinions vary about the prospects of the uranium market, governments
and producers generally being more optimistic than those with reservations
about the usefulness of nuclear energy. Appendix 1.4 contains an extract
from an Industry Commission report of 1991 summarising estimates of
future demand. Appendix 1.5 includes a summary of expectations contained
in submissions to the Committee.
A recent analysis by the Australian Bureau of Agricultural and Resource
Economics (ABARE) is illustrative of a more confident view of the international
market. According to the Bureau:
Demand from Australia's current customers in Asia is continuing
to grow. And France is a newly expanding market for Australia. Further,
demand for additional mine supply of uranium is increasing in response
to the sustained drawdown of excess civilian inventories around the
world since the mid-1980s.
The outlook for industry expansion in Australia is positive.
With uranium mining proposals now considered on their merits, it is
feasible that by early next decade Australian exports of uranium could
be as high as 17,000 tonnes U3 08 (over three times current exports),
yielding export revenue of $828 million (in 1996-97 terms). (Daniel
Stubbs and Paul Graham, "Australia in Future Uranium Markets",
ABARE Conference Paper 97.6, 24 February 1997, 2)
In its analysis of markets the ABARE view is that:
Although Australia's uranium exports are expected to increase,
the main markets are not expected to change significantly. Currently
Australia's largest uranium export market is Japan. In 1995-96, Japan
purchased 37 per cent of Australia's uranium. Other important uranium
markets for Australia include the United States (18 per cent), South
Korea (11 per cent), the United Kingdom (9 per cent), Spain (7.5 per
cent), France (7 per cent) and Sweden (6 per cent). (Ibid., 3)
ABARE believe that demand for uranium can be estimated "with reasonable
accuracy" because it is a function of -
the number and types of reactors to be commissioned during
the forecast period. Utilities' plans in the medium term are reasonably
firm and substantial planning lead times mean electricity production
over the medium term will take place at known levels. Slow growth
is anticipated in the net world stock of nuclear reactors and, therefore,
in world uranium demand. Total generating capacity is projected to
increase from 350 gigawatts in 1996 to 380 gigawatts in 2002. As a
result, uranium demand is expected to increase from 73,100 tonnes
U3 08 in 1996 to around 78,200 tonnes U3 08 in 2002. (Ibid., 4)
In forecasting increasing demand for uranium, ABARE have taken account
of the usefulness of nuclear energy in reducing greenhouse gas emissions.
On the other hand, ABARE point to "community concerns about nuclear
energy's perceived risks and cost disadvantages." Inability so
far to find a permanent means of disposing of nuclear wastes is a major
impediment. In a telling observation, ABARE state:
The US government is closer than any other to establishing
a permanent nuclear waste repository, but even in that country many
experts in the nuclear fuel industry do not expect to have a site
ready before 2010 - 55 years after the first nuclear power station
was commissioned in the United States. (Ibid., 4-5)
An illustration of a less optimistic view is provided by Friends of
the Earth Sydney. It contended, claiming to be in agreement with analysis
of ERA prior to its acquisition of the Jabiluka lease, that
. . . further expansion of the Australian uranium industry
will lead to price-cutting between Australian producers in an attempt
to maintain market share and will depress the uranium market globally
. . . the development of further uranium mines in Australia before
the year 2000 or 2005 would be economically unjustifiable. (S 40,
Part 2, 29)
Part of the FoE Sydney analysis derives from a view that reactor demand
"cannot expand very much in the short-medium term, and which we
expect ultimately to contract" (S 40, Part 2, 29).
For both governments and miners alike the world uranium market will
be of continuing interest. The more optimistic scenarios may not come
to pass but it is equally unlikely that the more pessimistic will.
The Committee have thus concluded, on the basis of available evidence,
that the uranium mining and milling industry will be sufficiently viable
financially to be able to meet its environmental, health and safety,
and security responsibilities fully. (Senator Margetts dissented.)
One factor of some importance influencing supply of uranium is availability
of reactor grade uranium derived from weapons-grade uranium previously
held by the former Soviet Union. Former weapons-grade uranium from US
sources, although of lesser quality, may also influence the market.
The Department of Primary Industries and Energy have advised the Committee
that this is unlikely to occur before excess civilian uranium inventories
have depleted to minimum levels.
According to the Department:
In any event, forecasts by market analysts of a substantial
shortfall in uranium supplies from around year 2000 have taken account
of potential supplies from blended down H[ighly] E[nriched] U[ranium].
These forecasts assume an important role for supplies from this source
but clearly identify they will be insufficient to meet the predicted
shortfalls unless complemented by new mine output from around 2000.
The Uranium Institute (a London based nuclear industry association)
earlier this month released its latest uranium market report which
analysed uranium supply/demand to 2015, including the impact of current
plans for diluting ex military HEU for civil use. The Institute warned
of a looming uranium supply shortage, pointing out that only if the
lowest demand projection is compared with the highest supply scenario
(including HEU) will production be sufficient to meet demand. Otherwise,
demand may exceed present planned supply by up to 17,700 t of U3 O8
pa.
(Department of Primary Industries and Energy, background brief
on Military Highly Enriched Uranium, 9/96, 3)
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