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The domestic uranium industry and imports of uranium

Auteur	US DOE
	-
Datum	februari 1981
Classificatie	3.01.5.10/09 (VS - URANIUMMIJNBOUW)
Voorkant

                    THE DOMESTIC URANIUM INDUSTRY AND
                             IMPORTS OF URANIUM
                                  SUMMARY
To assess the health of the u.s. uranium industry for this study, a review
was made of certain key measures: uranium reserves, exploration, produc-
tion, employment, productivity investment, and revenues. While some of
these factors are at historically high, if not record, levels, reductions
are taking place. In the case of employment, significant declines since
1978 are evident. Substantial productive capacity exists in terms of
resources and mine-mill capacity, but the associated costs-appear to be
high, particularly compared to major low-cost operations overseas. In
the long run, there appears to be a sub.stantial market for uranium. For
the time period 1980-1985, substantial delivery commitments are under con-
tract. The potential for additional contracts, according to data from buy-
ers, is limited. It is now evident that the available domestic and for-
eign supplies for the 1980-1985 period. is greater than the needs for those
years. This situation is reflected in the occurrence of a significant drop
in spot prices for uranium.
Under such circumstances, foreign uranium is viewed with concern even
though foreign deliveries to DOE enrichment plants have been much less
than the allowable limits. Uranium needs overseas are also less than the
supply. In addition, a number of low cost foreign deposits have been dis-
covered in recent years. In particular, Australia and Canada are potential
sources of additional low cost uranium that could seek a market in the
United States. Development and export policies of these countries could,
however, limit the actual availability and prices in the United States of
uranit.m from these sources. Also, there is a degree of risk that future
deliveries from foreign sources will not be made, due to political and
other uncertainties. In any case, the amount of available uncommitted
market in the u.s. is comparatively small for the next few years or so.
In summary, foreign uranium usage has been limited. While excess foreign,
low cost uranium is a potential threat; exporter country controls and
u.s. buyer preference for u.s. uranium, coupled with a lilrited future
additional u.s. market, reduce the actual threat involved. The problems
of the u.s. industry currently are related more directly to lack of domes-
tic demands and falling prices, rather than the use of foreign uranium.
The plan for removal of restrictions on foreign uranium has worked well.
There does not appear to be any current need for any changes to the plan.
However, the state of the domestic industry and the impact of imports
should continue to be monitored.
                                 BACKGROUND
The domestic uranium mining industry has been protected lllistorically
by preventing or limiting the use of imported uranium for domestic end-
use. The statutory basis for this protection appears in Section 161v
of the Atomic Energy Act of 1954 as amended (Public Law 88-489), which
provides:
     • ••• That the Commission, t() the extent nec·essary to assure
      the maintenance of a viable domestic industry shall not
      offer such services for source or special nuclear •terials
       of foreign ~rigin, intended for use in a utilization facility
      within or under the jurisdiction of the United States. The
      Conmission shall esta!>lish criteria in writing setting forth
      the terms and conditions under which services provided under
      this subsection shall be made available including the extent
      to which such services will be made available for source or
      special nuclear material of foreign origin intended for use
      in a utilization facility within or under the jurisdiction of
      the United States. ••
This section of the Act was established in 1964 at a time of limited ura-
nium demand for the commercial market, excess foreign supply, low uranium
prices, and forecasts of high future requirements for uranium. The effect
was a complete embargo on use of foreign uranium for domestic end use.
When it appeared that restrictions on foreign uranium could be eased with-
out affecting the·viability of the uranium industry, the Atomic Energy
Commission (AEC), after careful study and Congressional review, put into
effect a plan for gradu~l removal of restrictions on enrichment of impor-
ted uranium for domestic end-use. The plan, which was announced in 1974,
provided that in 1977 up to 10 percent of uranium furnished by a toll
enrichment customer for domestic end-use could be of foreign origin. The
amount would be increased to 15 percent in 1978, 20 percent in 1979, 30
percent in 1980, 40 percent in 1981, 60 percent in 1982, and 80 percent
in 1983. Starting in 1984 there would be no restrictions.
The AEC announcement also stated:
     ''It is not anticipated that any change will be required in
       the schedule now being established. However, the AEC will
      monitor the extent of importation of foreign uranium for
      domestic use and its effect on the viability of the domes-
       tic uranium producing industry and on the President's objec-
       tive of achieving a national capability for energy self-
       sufficiency. For this purpose the Commission, in addition
      to continuing its present program of monitoring uranium
       exploration activity, resource development, production capa-
       bility and the general uranium market situation, will also
      monitor purchase or other arrangements involving i~ort of
       any material destined for enrichment in private enriching
       facilities. If the extent of domestic use of foreign uranium
       should impair or threaten to impair the common defense and
       security, the Commission will institute such measures as are
      deemed necessary."
The basis for this stepwise removal of restrictions was that the expa~
ing requirements for uranium, both in the United States and in foreign
markets, would by the late 1970's absorb a higher percentage of the
world uranium production capability, and there would, therefore, be oaly
limited quantities of low-cost uranium seeking a market in the United
States. It was also judged that the u.s. industry would continue to
be substantially competitive with foreign production. Also, the antic-
ipated preference of United States uranium buyers for uranium of domes-
tic origin and the application of the percentage limitation to individ-
ual companies, rather than as an industry-wide 1imitation, would tend
to hold down the actual use of foreign uranium.

Recently there has been a substantial drop in spot prices for uranium,
reflecting reduced forecasts of uranium requirements and rising supplies
and production capacity. As a result, some u.s. producers have announced
production cutbacks, layoffs, or delays in expansions. These events have
created anxiety about the health of the domestic uranium mining industry
and the possible adverse effects resulting from importation of foreign
uranium. Responding to these concerns, Senator Domenici has proposed
legislation to prevent the Department of Energy {DOE) from enriching "feed
material furnished by the enrichment customer which is intended to be used
1n a domestic utilization facility where the fraction of feed material
furnished by the enrichment customer, which is foreign origin, exceeds 10
percent!' However, enrichment contracts signed prior to October 1, 1980,
were to be exempted from this restriction~ DOE, as part of its statutory
mission, is continually monitoring the viability of the uranium mining
industry, and at Senator Domenici's request has undertaken this study of
the potential impact of imported foreign uranium on U.S. producing compa-
nies.
The legislation establishing the restriction of Section 16lv and subse-
quent AEC analysis of the problem did not result in a definition of "via-
bility.M It was, in effect, judged that appropriate criteria for viabil-
ity might change from time to time and a rigid definition would not neces-
sarily be helpful. A number of factors must be examined to consider the
viability question. This study reviews the health of the domestic uranium
mining industry, the market outlook, foreign supply and demand, and con-
siders our experience in controlling the use of foreign uranium in the
United States. Some possible options for reducing the potential adverse
effects of importing foreign uranium a.re also examined.
Information used in this study is primarily from existing and newly devel-
oped data of DOE. Certain information developed by the Nuclear Assurance
Corporation and t~e.Nuclear Exchange Corporation were also utilized. An
ad hoc group of tne Mining and Milling Committee of the Atomic Industrial
Forum reviewed and commented on the technical information regarding the
status of both the domestic and foreign industries.

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