The global energy system will undergo major changes over the next twenty years to 2040. The extent of nuclear power’s role is uncertain, but likely to grow moderately, especially in Asia. Global uranium enrichment demand should remain less than the total available enrichment capacity, but domestic production mandates in China, and potentially the USA, may leave some capacity stranded. Enrichment providers will have to form partnerships with reactor vendors and governments to provide turnkey fission power plants and fuel, in order to avoid being locked out of the market.

Significant overinvestment in enrichment capacity during the 90s and first decade of this century has reduced the price of separative work units (SWU), a measure of enrichment effort and capacity, to less than half its long-term average. This and the fact that many reactors are older and able to purchase fuel from any provider has created a highly competitive global market with four major providers: TVEL (Russia), CNNC (China), Urenco (UK, DE, NL), and Orano (France) together producing 99.5% of the world’s SWU.

SWU demand for large reactor fuel will shift towards Asia over the next twenty years. There will be a 10 – 40% net decrease in the number of North American and European large reactors, depending on the success of license-extension efforts and trends in the price of variable renewable energy and energy storage. Globally, this will be more than offset by capacity growth elsewhere in the world, particularly China. However, the Chinese government has set a goal of achieving enrichment self-sufficiency and is building 10-15 reactors-worth of enrichment capacity each year, denying foreign vendors access.

TVEL, Urenco, and Orano will see a net decrease in demand unless they can capture other new business in Asia. Russia and China are offering comprehensive reactor deals, including fuel and financing, to make their exports more appealing. Orano has the capability to do the same in partnership with EDF, but this will depend on securing EPR newbuilds outside of France. Urenco does not have national reactor vendors to cooperate with, and the USA, South Korea, Canada, and Japan reactor vendors do not have domestically-owned SWU providers able to export large volumes of fuel. To avoid being left with excess capacity, Urenco will have to partner with these vendors or make the case to customers to diversify their fuel supply in order to reduce their dependence on China and Russia.

Advanced small and microreactors will be a new source of SWU demand. If small reactors are very successful, total SWU demand may exceed current predictions of global enrichment capacity. Smaller reactors require more SWU per GWd-e output and new exotic fuels, often with higher uranium enrichments than currently used in civilian reactors. While existing facilities are technically capable of producing these fuels, new licenses are required and regulators may prefer separate sites. Urenco and TVEL have the most experience with these new fuels and are currently offering delivery from existing facilities within 24 and 9 months respectively. New reactor vendors in many countries are developing small reactors for export. China has made the largest investment, followed by the USA, and arguably has first-mover advantage. If it successfully captures a large fraction of the small reactor market, TVEL, Urenco, and Orano will again see a net decrease in SWU demand.

The USA, South Korea, and Saudi Arabia are considering new domestic enrichment facilities to protect their SWU supply, support reactor exports, and possible military purposes. This is very expensive, costing at least $1000/(SWU/yr) for capacity versus $50/SWU on international markets. The three states are moving forward because there are legal and policy disagreements on whether imported uranium can be used for military non-weapon uses, such as naval fuel and tritium production, and they believe domestic SWU supply will also support their broader nuclear industries.

The anticipated changes to global enrichment capacity will create new proliferation pathways and incentives for states, and may challenge the IAEA nuclear safeguards system. The vast majority of new capacity will be in China, which is not subject to full IAEA safeguards because it is a nuclear weapon state. However, if other states fear that China will use this additional capacity to increase its nuclear arsenal, some may be inclined to develop their own nuclear deterrent, leaving the IAEA and international community with a very difficult task. A similar risk exists if Saudi Arabia is allowed to build and operate a large civilian enrichment facility.

New large civilian enrichment capacity in non-nuclear weapon states, such as South Korea, Japan, and Saudi Arabia, will make it possible for them to very quickly repurpose uranium and centrifuges to produce weapon material. Alternatively, they could use their large civilian programme as a cover to procure material and expertise for a covert enrichment programme. Widespread use of 20% enriched civilian fuel would increase this risk, as less material and enrichment capacity would be needed to produce a weapon.

While new enrichment capacity will create the opportunity for states to develop weapons, it is not a foregone conclusion. IAEA powers have been strengthened since the 1970s-90s and the international community has shown that sanctions and diplomacy can have a deterring or stalling effect. In extremis, cyber-attacks are an increasingly potent means of disrupting weapons programmes. As the world becomes less unipolar, it will remain critically important that the USA and other major powers provide the assurances and extended deterrence necessary to reduce the appeal of nuclear weapons.