US nuclear loan proposals won't affect uranium market much - analyst

4th March 2011 By: Matthew Hill

TORONTO (miningweekly.com) – US president Barack Obama’s budget request to double the value of loan guarantees the Department of Energy (DoE) can give utilities to build nuclear power plants won’t have much of an impact on the uranium market, an analyst said on Friday.

Under the request, which still has to be approved by Congress, the energy department would be able to guarantee an additional $36-billion in loans this year and next for the construction of nuclear reactors.

“The problem is getting it through Congress,” uranium consulting company UxC international operations vice-president Jonathan Hinze said.

Republicans in the US Congress have been highly critical of Obama’s budget request, and rejected its proposed spending cuts as insufficient for the country, which is forecast to post a $1,6-trillion deficit this fiscal year.

There are four nuclear reactors under construction in the US – the first of which making use of the government’s loan guarantees is scheduled to start operating in 2017.

“Fuel demand from new reactors starts hitting market five years prior to startup,” Hinze said, adding that the company building two of the new reactors, Southern Co, would likely only start sourcing fuel next year.

He said that “in a perfect world”, Congress would approve the additional loan guarantees in October, with the DoE giving them to nuclear power plant builders six to eight months after that.

The existing loan guarantees allowance together with the proposed additional $36-billion could finance another 10 to 12 reactors, said Hinze.

“It’s not insignificant, but it’s really more a matter of the policy makers following through with it,” he noted.

However, Hinze pointed out that there are long lead times for new nuclear reactors, and it was most likely that only seven would be built in the US by 2020.

NOT KEEPING PACE

While the US Congress debates whether to approve the additional loan guarantees, China is building 27 new reactors, according to the World Nuclear Association.

China aims to more than quadruple its nuclear capacity by 2020 from what it is currently operating and building.

China’s impact on the uranium market would therefore dwarf the impact from new US reactors.

“Clearly the US is not keeping pace,” Hinze said, adding that most of the new reactors being built in the country would start sourcing fuel from 2013 to 2016.

“It’s not really going to move the needle. It will be much more important to watch the latest Chinese government’s five-year plan on nuclear.”

The reasons for the US not building many new nuclear reactors is the emergence of natural gas as a cheap energy source, with lower capital costs than nuclear energy.

Electricity demand in the country has also suffered in the wake of the financial crisis.

Hinze said this was in spite of a democrat government that is more open to nuclear power than previous democrat leadership, as well as opinion polls showing that 70% of the US public are favourably disposed to nuclear power.

“People joke that at a time when policy is the most pro-nuclear it’s been in a long time, the economics are holding it back,” he said.

Uranium was trading at $69,75/lb on the spot market this week.