Uranium Market Outlook

Transcription

1 Scotia Capital Commodities Outlook 2013 Uranium Market Outlook Nick Carter Senior Vice President, Uranium January 15, 2013 The Ux Consulting Company, LLC

2 The Ux Consulting Company Founded in March 1994 Provides nuclear power and fuel cycle consulting and market information to suppliers, utilities, investors, and government agencies internationally Publishes: Ux Weekly (publication started in 1987) UxC News Headlines Quarterly Market Outlook reports with price forecasts Uranium, Conversion, Enrichment, and Fabrication Nuclear Power Outlook and UxC Requirements Model forecasting Uranium Suppliers Annual Key country analysis: China, Russia, India, Japan, Kazakhstan, etc. Special studies on Nuclear Reactor Technology Assessments, Small Modular Reactor Assessments, Nuclear Power after Fukushima, etc. UxC Policy Watch briefing service SpentFUEL and StoreFUEL Launched uranium futures contract with CME/NYMEX in May 2007 Offices located in Atlanta, GA, Washington, DC, and other locations The most complete & accurate consulting service in the nuclear fuel markets, backed by senior industry experience & strong fundamental analysis 2

3 Presentation Outline Global Nuclear Power Markets UxC Nuclear Power Forecasts Nuclear Fuel Demand Forecasts Uranium Market Analysis Final Thoughts 3

4 Global Nuclear Power Trends Traditional 20 countries with nuclear power in steady state, but a few in slow decline About 10 fast growth/new build expansion countries Up to 20 serious newcomer states only 10 likely by 2030 Post-Fukushima, safety is paramount (more than economics) Relative low costs of competing energy sources makes new nuclear a hard sell in many places Same logic for nuclear power applies as before: Increased world demand for electricity due to steady economic & population growth Climate change and environmental issues impact fossil fuels Many countries require enhanced energy security and diversification Long-term, strategic perspective requires nuclear be part of future energy mix However, fallout from Fukushima has created significant headwinds for global nuclear power 4

5 Japan Nuclear Power Status Kansai s Ohi 3 & 4 only two out of 50 operating; equal to ~6% of total GWe. Stress tests had been submitted to old NISA for total of 30 reactors. Utilities spending ~$12.5 billion on safety upgrades and new equipment. New Nuclear Regulation Authority (NRA) up and running since September. New regulations to be announced by April Seismic reviews ongoing. Although restart process is not yet clear, NRA now has authority instead of Prime Minister/Cabinet. However, local consent is still important. Approvals for some restarts could begin mid-2013, especially for Hokkaido, Kyushu, Shikoku, and Tohoku units (ones without earthquake fault concerns). Long-term energy policy remains unclear, but looking more positive. With LDP winning recent Diet election, full nuclear phase-out is very unlikely. UxC Base Case Restart Schedule: Summer 2013: 3 operating (~8% of total installed MWe) End 2013: 6 operating (~15%) Mid 2014: 9 operating (~23%) End 2014: 14 operating (~36%) End 2015: 22 operating (~56%) 5

6 Japan Long-Term Nuclear Forecast MWe net 50,000 UxC 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Pessimistic Optimistic Base Japan Nuclear Reactor Units, Units Pessimistic Case Optimistic Case Base Case Japan Nuclear Power Installed Capacity, MWe net Pessimistic Case 47,132 36,184 31,607 29,196 23,228 12,586 8,033 Optimistic Case 47,132 38,513 39,863 41,604 38,532 36,121 29,043 Base Case 47,132 38,513 38,644 32,717 31,836 24,758 14,116 6

7 China Nuclear Power Status Post-Fukushima, complete review undertaken of existing nuclear regulations and safety features at all reactors. Delays in new construction approvals is linked to government s need to gain public acceptance in nuclear program. Two reactors started operations since March Construction on 28 units ongoing expected to start up by end 2017 (Total: 43 units / ~41 GWe). Utilities spending ~$1 billion on safety upgrades and new equipment. Some retrofits required for CPR-1000/CP-1000 projects under construction. October 2012, State Council approved new nuclear safety plan as well as new nuclear energy targets: 58 GWe by 2020, 96 GWe by Gov t will spend ~$12 billion thru 2015 on huge safety improvement program. New reactor approvals can now resume after Communist Party transition. Faster shift to Gen III reactor technologies. Inland sites also on hold. Likely Construction Starts: 2013: 5 units / 5,500 MWe (startup in 2018) 2014: 5 units / 5,500 MWe (startup in 2019) 2015: 5 units / 6,100 MWe (startup in 2020) Total: 15 units / ~17 GWe 7

8 China Long-Term Nuclear Forecast MWe net 140, , ,000 Units Reduced forecast by 2020, 80,000 60,000 40,000 20, but Higher forecast by 2030! Units MWe UxC Units MWe 12,822 18,822 28,823 36,810 38,810 41,010 46,563 52,116 58,234 65,301 73,001 80,701 88,401 96,101 8

9 Other Key Countries United States: Kewaunee decommissioning isolated incident; shows huge impact of low gas prices. 5 reactors under construction: TVA s Watts Bar 2, Southern Co. s Vogtle 3 & 4, and SCANA s VC Summer 2 & 3. Total of ~5,600 MWe new capacity by South Korea: KHNP and KEPCO CEOs both dismissed over safety-related scandals. Not good! Recent election of Park Geun-hye could be positive development. UxC forecast: 20 GWe today / 30 GWe in 2020 / 40 GWe in 2030 Russia: Fukushima had little effect. Older units may D&D faster due to aging issues. UxC forecast: 24 GWe today / 31 GWe in 2020 / 35 GWe in 2030 India: Public opposition creating delays for some projects, especially greenfield sites. UxC forecast: 4.5 GWe today / 14 GWe in 2020 / 33 GWe in 2030 Europe: Germany phase-out is definite, but fuel requirements are not all covered to Belgium phase-out looks likely. First shutdowns in 2015, last ones in Switzerland unlikely to force shutdowns until 2030 (allow life extensions). France: Fessenheim 1 & 2 shut by Avg. lifetimes of 60 years. Few new builds. New reactors also expected by 2030 in: UAE, UK, Finland, Canada, South Africa, Ukraine, Slovakia, Poland, Belarus, Hungary, Turkey, Vietnam, Saudi Arabia, Brazil, Argentina, Bangladesh 9

10 GWe UxC Reactor Forecasts: Before and After Fukushima UxC Still show 61% net growth by % drop for 2020 in Base case 16% drop for 2030 in Base case 2012-Q4 Base 2012-Q4 High 2012-Q4 Low 2011-Q1 Base 2011-Q1 High 2011-Q1 Low Source: UxC Nuclear Power Outlook, Q

11 UxC Base Case Regional Forecasts # Reactor Units Nuclear Generating Capacity (MWe) , , , , , , , , , , , , North America Western Europe Eastern Europe Asia & Oceania Africa & Middle East South America Total MWe UxC Currently Operating: New Reactors added : New Reactors added : 435 Units / 371 GWe 97 Units / 100 GWe 178 Units / 205 GWe Source: UxC Nuclear Power Outlook, Q

12 Uranium Demand after Fukushima Million pounds U3O8 UxC URM Q High Demand URM Q Base Demand URM Q Low Demand URM Q High Demand URM Q Base Demand URM Q Low Demand Source: UxC Requirements Model 12

13 Uranium Market Overview Most utilities are fairly well covered through 2015 Utilities less fearful of price increasing given recent downtrend in prices Chinese spot buying appears to be increasing at lower prices Oversupply situation persists with Japanese reactors remaining offline Projected demand in 2012 = 184 million pounds Projected production + secondary supplies = 191 million pounds Deferred/canceled Japanese deliveries exacerbates supply/demand imbalance More planned mines could be delayed/deferred if price stays at current level AREVA likely to delay Imouraren project in Niger, etc. Several planned/existing U.S. projects at risk Producer consolidation could reduce future market competitiveness Secondary supplies remain a large part of the market despite end of HEU deal in 2013 Market fundamentals expected to improve in late 2013 if Japanese reactors restart, China growth continues, among other factors. 13

14 Uncovered Utility Requirements Million pounds U3O8 275 UxC Non-U.S. Utilities U.S. Utilities URM Base Demand Source: Uranium Market Outlook, Q

15 Uranium Prices, Spot Ux U 3 O 8 Price & Ux Long-Term (LT) U 3 O 8 Price US$/lb U3O8 $135 $125 $115 $105 $95 $85 $75 $65 $55 $45 $35 $25 Term Jan UxC 2013 Paper $ Spot Jan 2012 Paper 15

16 Change in Production Plans Pre- vs. Post-Fukushima Million pounds U3O8 260 UxC Q1 11 Plans Q4 12 Plans Source: Uranium Market Outlook, Q

17 Trends Among Uranium Producers Production concentrated in hands of mega-producers 9 producers represent ~87% of world production. Recent M&A activity shows a shake out is happening after Fukushima Primary producers are seeking value plays / Positioning for the long-term. Recent activity: Cameco purchase of Yeelirrie, CGNPC purchase of Husab, Rio Tinto purchase of Hathor, and Energy Fuels purchase of Denison s U.S. assets. Several producers have large uncommitted supplies in near-term due to Fukushima deferrals/cancellations Paladin, Rio Tinto, and BHP are among the hardest hit. Kazakhstan ramping up to ~65 million pounds U 3 O 8 by 2015 Kazatomprom controls majority of new supply. Crowding out other producers. Various new projects being canceled/delayed AREVA, BHP, Cameco, and Uranium One are all changing plans due to new market environment. 17

18 2013 World Production by Company Other 14.3% Kazatomprom 16.6% Navoi Mining 3.9% CNNC/CGNPC 5.0% Paladin Energy 5.0% Cameco 14.6% BHP Billiton 5.7% Rio/ERA 8.6% ARMZ/U1 13.5% AREVA 12.8% Projected 2013 World Production totals 159 million pounds U 3 O 8. 18

19 Secondary Supplies U.S. Department of Energy excess uranium inventories are lower, but still substantial (in various forms) 153 million pounds U 3 O 8 equivalent in million pounds U 3 O 8 equivalent in 2012 Russian HEU Deal ends in 2013 Russia could still use HEU internally, but no chance of HEU-II deal Russian government still holds large quantities in various forms Russia intends to mainly use its own inventories to fuel domestic reactors Commercial inventories held by utilities and suppliers Japanese utilities sitting on as much as 100 million pounds U 3 O 8 e Enrichers will continue to underfeed plants, especially AREVA and Russia Bottom Line: secondary supplies will continue to be a low cost supply source for uranium and other fuel components through 2020 and beyond at 8-15% of total supply. 19

20 Major World Supply Sources Mid Production Case Million pounds U3O URM World Market Demand Range UxC Inventory Shifting Inventory Drawdown Other Supplies New Production Existing Production Source: Uranium Market Outlook, Q

21 Major World Supply Sources Low Production Case Million pounds U3O URM World Market Demand Range UxC Inventory Shifting Inventory Drawdown Secondary Supplies New Production Existing Production Source: Uranium Market Outlook, Q

22 Price Outlook 3-month price outlook as of January 2013 $40-$46 range Availability of spot supply and limited discretionary purchasing prevents spot price from moving higher than mid-$40s 12-month price outlook as of January 2013 $38-$52 range Deferred deliveries to Japanese utilities could place additional downward pressure on the spot price Negative production news or further production delays/deferrals would support upward spot price movement Positive developments related to restart of Japanese reactors would likely push spot prices higher 22

23 Final Thoughts Future for global nuclear power is substantially less positive than it was prior to Fukushima. Still, net growth of ~61% by 2030 is a sign that nuclear is far from dead. Nuclear power s future depends greatly on handful of countries: China, Russia, India, South Korea, Japan, France, and U.S. Uranium market will remain relatively weak over the coming 12 months as long as most Japanese reactors remain offline. With end of HEU supplies, the work-off of excess commercial inventories, and delays in new production, prices will start seeing improvement in the mid-term ( ). Utilities are still concerned about long-term security of supply, and thus some are willing to pay a premium for future production or supporting new production through direct investments. Although this is still a very uncertain period in the market, there seems to be more upside potential than downside risk given the current state of the market fundamentals. 23

24 Thank You! Questions?