U.S. Uranium Industry Seen Continuing Long Decay

The air was crisp, the surroundings were congenial and the mood was upbeat when producers and consumers of uranium gathered last month in Santa Fe, N.M., for a conference on the state of the U.S. uranium industry.

In fact, everything was cheerful except the reports presented by the speakers, which showed the continuing decline of an industry thrown into terminal doldrums by the leveling of demand as construction of nuclear power plants came to a halt and by the rise of imports. The participants didn’t seem disappointed by the discouraging news, but that, they said, was because they didn’t expect anything else. Domestic uranium mining and production have been in decline for years, and there is no prospect of an early turnaround.

Speaker after speaker said that although worldwide demand for enriched uranium is rising, U.S. producers will command a dwindling share of that market because they cannot match the prices of foreign producers. Moreover, they said, consumers of uranium in this country, already importing more than half the uranium they use, are likely to continue to turn to lower-cost foreign suppliers.

A Few Optimists

The U.S.-Canada Free Trade Agreement, they said, ensured open access to the U.S. market for Canadian uranium, and domestic producers cannot compete with its higher-grade ore and lower-production cost. Namibia also is expected to become an important supplier when it gains independence from South Africa and is freed from sanctions that have kept it out of the U.S. market.

In addition, participants said, the relatively low price of oil and gas and the political and environmental problems associated with nuclear power make it unlikely that any great number of nuclear plants will be added to the 110 now operating, so no surge in domestic uranium demand is on the horizon. There were a few optimists, but they spoke mostly of what might be, not of what is. Harold Finger, president of the U.S. Council for Energy Awareness, the lobbying arm of the nuclear industry, told the conference that “the worst is behind us. This may sound strange with spot uranium prices at an all-time low, but the realization is growing on Wall Street, though not among the public, that we need new (electric generating) capacity. Sooner or later, common sense will prevail” and the country will resume the construction of nuclear power plants. “Don’t give up hope,” he said. “The best is yet to come.”

Unless things get worse, as some participants feared.

“With current prices in the $9-$10 per pound range” against production costs of more than $20, “there is a basic question as to whether any producer can continue to survive,” said Paul K. Willmott, president of Umetco Minerals Corp. of Danbury, Conn.

Getting Out of Business

“In uranium the world’s productive capacity today is far ahead of market needs,” said Kurt E. Pralle, a mining engineer who is now a vice president of Citibank. “There are several new low-cost producers, particularly in Canada, and it is highly unlikely that prices will again reach the all-time spot peak of $43.35 a pound of some years ago. On the contrary, prices may well move more toward the levels pertaining in the 1960s, when they were not too far above $5 for a good many years.”

That prospect makes it unlikely that the domestic uranium industry will have any great need for capital to expand at least in the next few years, Pralle said. Willmott said that if capital is needed it will be hard to come by because the major oil companies, which a decade ago were opening their deep pockets to the uranium industry, are getting out of the business. Howard Walton, director of the nuclear and alternate fuels division of the federal Energy Information Administration, said that in 1988 “the uranium industry’s net loss amounted to $125 million, with an operating loss of $17 million.”