Situation in the World Market for NFC Products and Services

This forecast of development of the world nuclear energy sector underlies the strategy employed by JSC "TECHSNABEXPORT" in the world market of nuclear fuel cycle (NFC) products and services, consisting of the following key segments: natural uranium, natural uranium conversion into uranium hexafluoride, isotope uranium enrichment (measured in separative work units – SWU), аs well as fabrication from fuel assemblies (FA) for NPPs.

The Fukushima NPP accident had an obvious negative impact on the market conditions in 2011, which manifested itself in a market price drop. Thus, an upward trend for prices in March 2011 in the natural uranium market was interrupted. As a result, by the end of 2011 the spot price quotations stabilised at the level of little more than 50 USD/lb of U in the form of U3O8. The long-term price quotations for uranium enrichment services also saw a reduction – from the maximum value of155 USD/SWU in March 2011 to 148 USD/SWU in December 2011.

The supply trends in the world market for products and services of the nuclear fuel cycle (NFC) have been significantly different for each specific product segment. In the natural uranium market one of the key trends of the recent years has been an emergence of Kazakhstan as the key producer of this material. This pushed Canada and Australia, which have traditionally been the largest producers, to the second and third places.

Geographical proximity of natural uranium production sites in Kazakhstan, including those controlled by the State Atomic Energy Corporation ROSATOM units, to Russia's conversion and enrichment facilities makes Russian NFC products and services more relevant and appealing to potential customers.

The conditions in the uranium enrichment market are largely determined by the process of construction of new uranium enrichment plants in the North America and Europe by a number of foreign companies. In 2011, when the demand from the energy companies was diminishing, market prices were dropping and the uncertainty was growing, Areva, USEC and Global Laser Enrichment had to revise their plans for building new enrichment plants in the US. In this situation JSC "TECHSNABEXPORT", being a supplier that relies on the existing efficient production capacity of the Russian separation-sublimation complex (SSC), is by all means in a more favourable position than its competitors.

One of the key characteristics of the world uranium market is intermittence of contractual activity. The majority of the deals are long-term deals. The cycle of long-term contracts, which peak was reached in the end of the previous decade, effectively finished in 2011. This does not mean that at the moment no new contracts are being negotiated, however, the amount of the new deals is significantly lower than in the peak period.