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Japan’s nuclear fuel stockpile weighs on uranium producers

A worker walks out of a full body scanner at Tokyo Electric Power Co.’s Kashiwazaki Kariwa nuclear power plant, the world's biggest, in a file photo. All but two of Japan’s 50 nuclear reactors are offline.


Nuclear fuel stockpiled by Japanese utilities is creating an overhang on world markets that will weigh on production in the years ahead, uranium enrichment firm Urenco Group said on Thursday.

Japan's 50 reactors used just over 10 per cent of the world's enriched uranium before the 2011 Fukushima disaster, but with all but two reactors offline, there is now overcapacity in the nuclear fuel industry.

"We expect our customers to use up that stock when they restart operations, but in the short run, that reduces demand for our services," Urenco chief executive Helmut Engelbrecht said after the firm reported 2012 results.

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Urenco's capacity rose to 16.9 million "Separative Work Units" (SWU) per year from 14.6 million at the end of 2011 and is on track to reach its target of 18 million SWU/year by 2015 as the firm completes its new U.S. facility in New Mexico.

As Japan's reactors used about 5 million SWU per year before the March 2011 shutdown, there is now a cumulative overhang of about 10 million SWU.

There are 435 operable reactors in the world, according to the World Nuclear Association.

Urenco is the world's second-largest uranium enrichment firm after Russia's Tenex and said its 2012 market share rose to 31 per cent from 29 per cent. France's Areva Group and U.S. USEC Inc. are also major nuclear fuel producers.

Urenco reported 2012 revenue up 23 per cent at €1.6-billion ($2-billion U.S.) and net income up 12 per cent at €402-million. Its order book fell by €2-billion to €18-billion and is now more than 11 times revenue, versus more than 15 times last year.

Mr. Engelbrecht said that while Urenco's enrichment capacity would continue to grow in the years ahead as it completes its U.S. plant, it would scale down its centrifuge manufacturing business to cope with an expected fall in demand.

Urenco produces centrifuges through Enrichment Technology Company (ETC), a 50-50 joint venture with Areva. Its 2012 results included a €58-million impairment loss on ETC.

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Mr. Engelbrecht said he expected the focus of the nuclear industry would shift from the west to developing countries in Asia, Africa and the Arab world, but he did not raise the possibility of building new plants in these regions.

He told Reuters the nuclear industry's fast growth in China provides good commercial reasons to build an enrichment plant there, but that would require China to sign up to the Almelo Treaty that governs Urenco.

"Unfortunately, the Chinese are building up their enrichment capability with the Russians," he said.

Mr. Engelbrecht refused to comment about ongoing talks about a sale of Urenco by its shareholders – the British and Dutch states and German utilities RWE AG and E.ON AG – and said "this is not a straightforward easy process."

He declined to say whether Russia or China could be acceptable as shareholders but said any sale would have to respect Almelo Treaty provisions against nuclear proliferation.

"Certain countries, given their existing policies, would not qualify. North Korea is one of them," he said.

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