Russian uranium import ban ripples through clean energy sector.

With the clock running down on uranium stockpiles, the U.S. faces an urgent need to secure its energy future. New legislation and significant investments are set to revive domestic production of this zero-carbon energy fuel, reduce reliance on foreign imports, and bolster national security –measures that aim to ensure a stable uranium supply for nuclear energy as the country races to meet its demands.

The White House

President Biden signing HR 1042, or the Prohibiting Russian Uranium Imports Act, into law.

In May 2024, the U.S. enacted the Prohibiting Russian Uranium Imports Act, effectively banning the import of uranium from Russia. This bold move signaled a monumental shift for America's civil nuclear energy sector.

With shares of uranium companies tumbling earlier this year due to market uncertainties, the Senate's late approval of the Prohibiting Russian Uranium Imports Act immediately sent shockwaves through the energy markets.

"This is a national security priority as dependence on Russian sources of uranium creates risk to the U.S. economy and the civil nuclear industry that has been further strained by Russia's war in Ukraine," the White House said in a fact sheet. "Without action, Russia will continue its hold on the global uranium market to the detriment of U.S. allies and partners."

The legislation, which took effect on Aug. 11, aims to promote domestic production of advanced nuclear fuel by eliminating reliance on Russian-origin uranium imports, thereby stimulating the U.S. nuclear sector and fostering domestic competition.

The House bill was approved in December amid growing congressional support to cut off Russia in the wake of its invasion of Ukraine, which had already banned imports of Russian oil by working with G7 (Group of Seven) allies to impose a price cap on seaborne exports of crude and petroleum products.

The ban prohibits the importation of unirradiated low-enriched uranium (LEU) produced in Russia or by a Russian entity. It also bans uranium that has been swapped or obtained to circumvent restrictions.

However, not all is dire straits, the legislation, which expires by the end of 2040, permits the Department of Energy (DOE) to issue waivers authorizing the entire volume of Russian uranium imports allowed under export limits set in an anti-dumping agreement between the Department of Commerce and Russia through 2027.

Without those waivers, the market could see a significant spike in enrichment costs, according to Jonathan Hinze, president of nuclear fuel market research firm UxC.

"But if there is an immediate ban it could be even more extreme," he said. "There are very limited supplies available."

Far-reaching effects

The passing of the Prohibiting Russian Uranium Imports Act was met with strong support from some industry leaders, reflecting a broad consensus on the need to secure domestic energy sources.

Energy Fuels stands to significantly benefit from increased demand and diminished Russian imports.

"The U.S. should not rely on bad international actors to supply the fuel that powers our homes and workplaces with carbon-free nuclear energy," said Energy Fuels President and CEO Mark Chalmers. "As the country's leading producer of uranium, we are ready to safely and responsibly produce the uranium needed for nuclear energy-one of the best tools to reduce carbon emissions."

"It is critical to our national security and our energy security that we move immediately to revitalize our domestic uranium conversion and enrichment capabilities to ensure an uninterrupted supply of fuel," a spokesperson for U.S. utility Constellation Energy told Reuters.

U.S. Nuclear Regulatory Commission

Constellation Energy, the largest producer of carbon-free energy in the U.S., operates 21 nuclear reactors and provides energy to millions of homes and businesses.

To prevent immediate supply disruptions, the waiver system allows utilities to import Russian uranium until January 2028, if no alternative sources are available or if imports are deemed in the national interest.

Despite this buffer, some analysts have highlighted the immediate risks that could arise even with this supply failsafe in place.

"The global markets are just not ready for a complete ban," said Nikko Collida, vice president, business development at ConverDyn, which provides uranium conversion services from the Metropolis Works conversion facility in Illinois. "It's not clear that the United States is ready to rapidly wean itself off Russian supply and, while waivers are expected to be the solution near- and mid-term, if Russia pulls the rug out from under this, it's going to be pretty catastrophic for the market."

Uranium Royalty Corp. CEO Scott Melbye also expressed concerns about the potential fallout.

"The increased isolationism of Russia from the West runs the risk of the fuel supply being divided along BRIC (Brazil, Russia, India, China) and Western lines," he said. "It's very important that the West develop its resources and nuclear fuel cycle in places like Canada, the United States, and Australia."

And their concerns aren't unfounded.

In May, Russia's state-owned uranium supplier Tenex notified its U.S. customers, including Constellation Energy Corp., Duke Energy Corp., and Dominion Energy Inc., that they had 60 days to secure a waiver exempting them from the import ban. Tenex-USA President Fletcher Newton told Bloomberg that the company "fully intends to honor all their contractual commitments in the U.S., but it has no control over what action the Kremlin might take."

Nonetheless, Melbye remained relatively optimistic.

"A number of U.S. utilities will sign on to the waiver, but we're just kicking the can down the road. The sooner we get off Russian supply, the sooner we won't be vulnerable to a cut off by Putin," he said.

Even as the U.S. seeks to reduce its reliance on Russian uranium, it must still contend with the current import landscape and consumption needs.

Uranium market overview

DOE estimates that U.S. utilities have roughly three years of LEU available through existing inventory or pre-existing contracts to buffer the impending countdown.

Of particular note, the inventories include uranium at various stages of the nuclear fuel cycle, encompassing both triuranium octoxide (U3O8) and LEU.

This comprehensive inventory ensures availability of supply from raw material to reactor-ready fuel, but converting and enriching uranium remains a time-intensive and resource-heavy process, something that Russia has held a near-monopoly on for decades.

According to the Energy Information Administration's 2023 Uranium Marketing Annual Report, the largest source of uranium delivered last year was of foreign-origin with Canada the top source at 27%, followed closely by Australia and Kazakhstan with 22% each. Russian-origin material accounted for 12% and Uzbekistan-origin material accounted for 10%, while domestic material made up only 5% in 2023, the same percentage as 2022.

In total, this came out to roughly 49.2 million pounds of U3O8 – a compound of uranium used to make nuclear fuel.

During 2023, owners and operators of U.S. civilian nuclear power reactors purchased uranium deliveries equivalent to a total of 51.6 million pounds of U3O8.

Although not a large disparity, with the loss of nearly 10% from a major supplier, especially from a country that dominates the global market on enrichment capacity, it becomes an issue of establishing domestic sources to fill that gap.

The state of domestic production further underscores the hill to climb. In 2023, U.S. uranium mines produced only 50,000 pounds of U3O8 – a sharp decline from the 194,000 pounds produced in 2022.

It is estimated that U.S. reactors require approximately 32 million pounds of uranium annually to continue supplying roughly 20% of the country's electricity.

What led to this

Practically cornering the enrichment process, Russia has all but left the U.S. behind, hosting an estimated 44% of global enrichment capacity.

Historically, Russia's leadership in this sector has been facilitated by centralized control – a system in which all the primary processing is done at a single location rather than at multiple points throughout the system – by Rosatom, allowing it to become a major exporter of nuclear technologies and services.

This centralization, which enabled Russia to establish a significant presence in the global market, has long raised concerns about Moscow's ability to leverage its position for geopolitical purposes, especially emphasized by the ongoing war in Ukraine.

So, what exactly led to Russia's nuclear fuel dominance?

Russia's control in the enrichment sector can be traced back to after the end of the Cold War. In 1994, the U.S. and Russia signed a contract implementing the Megatons to Megawatts program, that saw highly enriched uranium from dismantled Russian nuclear weapons converted into low-enriched uranium for U.S. nuclear power plants.

These arrangements, along with cost advantages, led to the U.S. becoming heavily dependent on Russian enrichment services.

This dependency now poses a significant risk to U.S. energy security, as uranium in its natural form must be processed before it becomes a viable fuel source, a situation exacerbated by lack of domestic infrastructure over the last three decades.

Visual Capitalist

An infographic put together by Visual Capitalist that details the extraordinary capabilities of uranium and how it compares to other common fuels. Click image to see full infographic.

Enriching natural uranium into nuclear fuel involves separating uranium-235 (U-235) from uranium-238 (U-238) to increase the concentration of U-235, making it a viable fuel source.

Currently, the U.S. largely uses LEU with U-235 concentrations of up to 5%, for its nuclear reactors. However, the future of nuclear energy, particularly with advanced reactors and small modular reactors (SMRs), lies in high-assay low-enriched uranium (HALEU).

HALEU, with U-235 concentrations between 5% and 20%, allows for more efficient and compact reactor designs, providing a higher energy density and improving the economics and safety of nuclear power.

To address this, the Department of Energy (DOE) has been advocating for the expansion of domestic HALEU production.

With the Prohibiting Russian Uranium Imports Act in place, the urgency to establish a robust domestic enrichment capability has only intensified, unlocking $2.7 billion in congressional funds earmarked for this very purpose, aiming to build the infrastructure necessary to produce HALEU domestically.

"A ban on Russian uranium imports is needed to release the USD$2.72 billion included in recent appropriations to revitalise a competitive domestic enrichment and conversion capability," said Maria Korsnick, president and CEO of the Nuclear Energy Institute. "It will take many years to build US capacity to serve the existing fleet and the deployment of next generation nuclear. The implementation of a meaningful programme to support capacity building is critical."

Strengthening domestic supply

The congressional fund, initially set aside from previous nuclear energy appropriations in the Bipartisan Infrastructure Law for fiscal years 2022, 2023, and 2024, was contingent on the enactment of the Prohibiting Russian Uranium Imports Act.

With the bill now in place, DOE is set to use these funds to establish a robust domestic enrichment capability, particularly for HALEU.

Shortly after the signing, DOE's Office of Nuclear Energy put out a request for proposals that included the appropriated $2.7 billion for contracts to supply domestically produced low-enriched uranium, with a ceiling worth up to $3.4 billion for additional enrichment services and infrastructure development.

Encouraged by rising uranium prices and government support for nuclear energy, Energy Fuels has restarted production at three of its uranium mines in Arizona and Utah. Chalmers indicated that the company expects to produce between 150,000 to 500,000 pounds of U3O8 during 2024, with production anticipated to increase further in 2025 as they process uranium ore and alternate feed materials from their current stockpiles.

"The substantial increase in uranium prices, U.S. government support for nuclear energy, and a global focus on reducing carbon emissions have driven us to resume large-scale uranium production," the CEO said. "We are uniquely positioned to take advantage of favorable policy and market conditions."

North of the border, with the market already feeling the effects of the import ban, Cameco, a Canadian uranium producer, reported a significant increase in its earnings due to rising uranium prices and long-term order growth.

Witnessing a 157% jump in its second quarter 2024 earnings report, Cameco is seeing first-hand the benefits of the ban being put in order.

"The need to replace retiring fossil fuel generation is clear, and nuclear energy is being recognized as a critical tool in the fight against climate change," said Cameco President and CEO Tim Gitzel.

Add this proof to the list of companies and projects shifting focus to this fuel commodity, and regardless of its designation as a critical mineral, uranium is seeing a rush not seen since the days of the Manhattan Project.

Though it took years of preparation, the U.S. is now poised to enhance its energy security, support its nuclear fleet, and contribute significantly to global efforts to combat climate change through the expanded use of nuclear power. While the journey ahead is fraught with challenges, the groundwork is being laid for a more resilient and sustainable nuclear energy future.