Australia’s $411 million uranium export industry to the US has dodged a bullet with Donald Trump set to reject calls from local mining companies and some Republicans for a 25 per cent “buy America” domestic quota.
In a big win for lobbying efforts supported by Australia, it is understood Mr Trump will announce shortly that he won’t support recommendations from the US Commerce Department that would force nuclear power station operators to buy a significant portion of the radioactive fuel from US suppliers.
US President Donald Trump has until Saturday to decide on imposing a domestic uranium quota. Bloomberg
Instead Mr Trump has decided to make no changes to rules governing uranium supply in a move that may even be worth more to Australian miners than last year’s unique US tariff exemptions for steel and aluminium shipments.
Mr Trump is understood to have been dissuaded from imposing a quota against the advice of his own Commerce secretary Wilbur Ross because of concerns it would drive up costs for nuclear reactor operators. Those operators are already under pressure from providers of cheaper sources of power such as natural gas and renewables.
According to one estimate provided to The Australian Financial Review, the equivalent of as many as 12 million American households could have been affected by the market-distorting effects of government sourcing rules.
And while Australia doesn’t allow shipments of uranium to the US for milliary purposes, a quota would also have undermined the Trump administration’s broader efforts to secure supply lines for vital rare earth metals and minerals such as lithium.
The president in late 2017 ordered his administration to look at guaranteeing supply from trusted allies such as Australia amid concern Washington’s growing rivalry with Beijing could trigger disruptions.
The uranium question has hung over the industry ever since the Commerce Department delivered a report to the president in April into the impact of uranium imports on US national security after a nine-month investigation.
A 90-day period for Mr Trump to make a decision ends on Saturday, local time.
A source said Mr Trump was given a binary choice: take no action or impose a schedule of rising quotas starting at 5 per cent in the first year and increasing by 5 percentage points for another four years.
Reuters reported on Thursday (Friday AEST) that Mr Trump was given three options: the ones listed above, plus one that would delay a decision by six months.
The so-called Section 232 investigation was triggered by an early 2018 petition from US uranium mining companies Energy Fuels Inc and Ur-Energy.
They argued the loss of a viable US-based industry would hurt energy and economic security.
A 25 per cent quota would have added $US500 million ($716 million) to $US800 million in annual costs to an industry that sustains 100,000 direct jobs and another 475,000 indirect jobs, according to the Ad Hoc Utilities Group, which represents US nuclear power generators.
By contrast the entire US uranium mining industry employs just 400 workers – which implies an effective subsidy of US$2 million per worker.
The decision to reject the quota is potentially an even bigger win for Australian exporters than last year’s steel and aluminium exemptions.
Australia, the world’s third-largest producer of uranium ore and home to the largest known reserves on earth (about 30 per cent), exported 16,155 thousand pounds (7342 tonnes) of ore concentrate in 2017, with a third sent to the US, according to the Australian government.
With some of Australia’s ore also sent to Canada or Europe for processing, the US accounts for about 60 per cent of final demand for Australian uranium.
Three companies currently mine the ore in Australia, BHP which owns Olympic Dam, Rio Tinto, which owns Energy Resources of Australia, which operates the Ranger mine, and General Atomics, a privately held US firm that operates the Beverley mine.
The issue has been the subject of fierce lobbying from all sides. Bloomberg reported that Prime Minister Justin Trudeau of Canada, another major exporter of the radioactive material to the US, was expected to make the case against import quotas.
And The Washington Times said a group of 19 Republican lawmakers mostly from western states signed a letter on Thursday (Friday AEST) urging Mr Trump to impose quotas on uranium imported from Russia and elsewhere. They argue the US has become too dependent on adversaries for the fuel used in power stations and nuclear submarines.
A submission by the Australian government to the Commerce department last year argued Australia is a “reliable, secure, long-term supplier of US uranium” needs, and noted America’s own investments in the industry downunder.
America currently obtains just 7 per cent of its annual uranium requirements from domestic sources.
With the US uranium industry producing roughly 700,000 pounds last year, a 5 per cent quota would translate to between 2 million and 2.5 million pounds, said Chris Gadomski, a nuclear analyst at Bloomberg New Energy Finance.
Colorado-based Energy Fuels and Wyoming’s Ur-Energy, the petitioning firms, have already made preparations in anticipation of Mr Trump curbing imports.
“If we get a positive determination out of the president, our company is going to start doing things immediately,” Mark Chalmers, president of Energy Fuels, told Reuters this week. That would lift production by between 2.5 to 3 million pounds per year.
UR-Energy vice president John Cash said it could ramp up production at its existing mine in Wyoming to 1 million pounds per year and start a new project “relatively quickly”.
Source: Financial Review