Pinch yourself. It has finally happened. This time, it really will be released. It will be – sniff – over.
The US Department of Energy has announced that later today they will release the report of the Nuclear Fuel Working Group, which was constituted after the s232 trade investigation into uranium imports.
The s232 saga started way back on 16 January 2018, shrouding the uranium sector in a mouldy wet blanket that has suppressed fuel buyer activity and tested the most resilient uranium investors’ patience.
And now the final stanza in this long-winded ode is about to be told – at a media briefing starting at 10:50am (EDT) today. An embargoed report will be provided to qualified media at 9:00am (EDT), with the embargo lifted at noon. So, the time to start looking for media reports is 12:00pm EDT/Toronto, 5:00pm London, 7:00pm Moscow, 10:00pm Nursultan, 12:00am Perth and 2:00am Sydney.
For investors new to uranium, here is a quick summary of s232 so you know what to look out for:
What is s232 of the Trade Expansion Act?
Section 232 of the Trade Expansion Act of 1962 is designed to protect national security industries that are under threat from imports or unfair trade practices. It was introduced in the wake of the Cuban missile crisis, when lawmakers realised that many executive powers required for rapidly protecting US strategic interests could only be deployed in time of war. Under s232, the Department of Commerce has a maximum of 270 days to investigate the complaint and, if the relevant actions threaten to impair national security, make recommendations to the White House. The President then has up to 90 days to decide whether to act on any recommendations, which must be implemented and announced publicly within a further 45 days. If the investigation confirms that (a) there are unfair trade practices and (b) those practices may put US security at risk, then the President has very wide powers that can be implemented without recourse to Congress.
The last time a section 232 investigation was conducted into uranium was in 1989 – the US produced 40% of its uranium requirements at that stage so no remedies were enacted. The Trump administration has since used s232 to impose aluminium and steel tariffs.
What started this s232 investigation?
Energy Fuels and Ur-Energy (the two largest US uranium producers) filed a petition in mid-January 2018 asking the Department of Commerce to initiate a s232 investigation into uranium imports. The petition argued that US uranium producers are under threat from “state-sponsored” producers which, although not specifically stated, would imply producers in Russia and Kazakhstan. The petitioners linked cheap Kazakh material to a decade-low uranium price that has forced almost all US uranium production out of business (in 2019 the US produced less than 1% of its uranium requirements).
The petitioners sought a mandated requirement that US utilities purchase a minimum 25% of their requirements from US producers. The petition disrupted the procurement programs of utilities in both the US and elsewhere. The utilities surprised the petitioners by pushing back hard, sparking a public debate that was, at times, vitriolic and disingenuous. Many question how the petitioners will rebuild relationships with US utilities from here.
When did the investigation commence?
The Department of Commerce took six months to confirm, on 18 July 2018, that they would commence the s232 trade investigation. The announcement was a relief after a protracted period of uncertainty and at least put a timeframe on the long process ahead.
The DoC provided a recommendation to the White House on 15 April 2019. At no point was the recommendation made public, although Bloomberg reported on 21 June that DoC insiders had leaked the key recommendation, being an initial 5% quota that would escalate by 5% per year.
What did the s232 investigation find?
On 12 July 2019, President Trump announced the completion of the s232 trade investigation.
President Trump decided to take no trade action, which lifted concerns that a quota, tariff or other trade action would be imposed under the broad power delegated to the President under s232. Instead, President Trump initiated a review of the domestic nuclear supply chain (uranium production, conversion, enrichment and fabrication) in the context of the 2017 White House initiative to revive, revitalise and expand the nuclear energy sector.
What is the Nuclear Fuel Working Group?
Although President Trump did not agree that uranium imports threaten to impair the national security of the United States, he acknowledged that the United States’ uranium industry faces significant challenges in producing uranium domestically and that this is an issue of national security (because, for instance, the US Navy must use domestically produced uranium for its maritime nuclear power). Accordingly, to address concerns regarding the production of domestic uranium and ensure a comprehensive review of the domestic nuclear supply chain, the President directed that a Nuclear Fuel Working Group be established. The Working Group included the Secretary of State, Secretary of Energy and Secretary of Defence, amongst other key officials, and was charged with developing recommendations for reviving and expanding domestic nuclear fuel production (that is, uranium, conversion, enrichment and fuel fabrication).
Why did it then take so much longer to resolve?
The Working Group was required to submit, within 90 days, a report to the President making recommendations to further enable domestic nuclear fuel production.
The deadline was initially 10 October 2019, although in mid October the deadline was extended by 30 days when the process was “in the final stages of the inter-agency process within the executive branch” according to Secretary of Energy, Dan Brouillette, who had only just replaced Rick Perry. Nothing was forthcoming and in early December Bloomberg reported a leak that the Working Group would recommend direct government interaction, in the form of either/both a Department of Defence contract to purchase uranium for military stockpiles or a Department of Energy contract to increase the DoE strategic reserves from current modest levels (approximately 7 reactor reloads).
Nothing further was heard until February, when the Trump Administration proposed its FY21 budget (commencing 1 October 2020) with the inclusion of $150 million per annum for a Uranium Reserve. The budget notes stated that “Establishing a Uranium Reserve provides assurance of availability of uranium in the event of a market disruption and supports strategic US fuel cycle capabilities. This action addresses immediate challenges to the production of domestic uranium and reflects the Administration’s Nuclear Fuel Working Group (NFWG) priorities. The NFWG will continue to evaluate issues related to uranium supply chain and fuel supply.”
Since then Secretary Brouillette had made several comments about the Report being imminent, including telling a Congressional hearing on March 4 that “it is my sincere hope that later today you will see the final report.” At the time he said the report “would also include other measures we will take to enhance the mining and capabilities… we have to have enrichment, conversion… the proposal will be all-encompassing and will address the entirety of the nuclear fuel cycle.”
Predictably, by then, the report was not forthcoming. And then the US entered COVID-19 and the report was assumed to be back on the shelf for some time.
Brandon Munro is CEO of uranium developer, Bannerman Resources ASX: BMN, and regular uranium market commentator on CRUX Investor and CRUX Club.
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