My colleague Lisa Reisman wrote a piece in early August that proved both very popular and as it turned out somewhat prescient. Raising questions about the desirability of a Chinese state controlled steel company building a major new steel mill in the US added to a debate that had started a few days before between those that championed “free trade with no questions asked against those that accepted “free trade providing it is on a level playing field. The latter won the day and Anshan Steel withdrew their plans a few weeks later, though we have reported Anshan has not completely withdrawn from the process and hopes to still make an investment.
So it was interesting to compare that debate with reports in Reuters and the Financial Times covering Rosatom’s proposed majority stake in Canada’s Uranium One mine and their announced intent to use it as a springboard to build a uranium enrichment plant in the US. Rosatom already has uranium mines and enrichment facilities in Russia as well as mining operations in other parts of the world but a reprocessing plant in the US would give it a role in the North American supply chain and the opportunity to get involved in new reactors to be built in the US in years to come. As the FT points out, Rosatom already controls 40% of the world’s uranium enrichment capacity and 17% of the fuel fabrication market. It supplies fuel for 74 nuclear reactors in 15 countries, and is in talks to build 18-20 power plants around the world. It is also owned by the Russian state and therefore, like Anshan Steel is to Beijing, Rosatom is to Moscow.
The arguments against Anshan’s involvement in the US steel industry could be broken down broadly into a) the US already has too much capacity, why add more, b) the technology in the US is state of the art unlike China where they barely operate the steel making process proposed and c) there is no level playing field a Chinese state entity is proposing setting up a steel making facility in the US but US companies are prohibited from doing the same in China. Does the same apply here?
Well the US has a significant nuclear enrichment capability and according to Australian research a few years ago when that country was considering going into uranium enrichment the world had sufficient capacity to meet current and foreseen demand for at least the next ten years, so there is a limited business case for additional capacity. Nor is an expansion of the nuclear power industry in North America looking especially likely, in spite of the current administration’s enthusiasm. Significant hurdles need to be overcome particularly disposal of waste material which further enrichment facilities would only add to. The supply issue has a special relevance though in the case of uranium because the US currently imports a lot of its enriched uranium from abroad, particularly from Russia. So although the world doesn’t need more facilities, arguably the US would be less exposed if it had more indigenous enrichment even if it was in the hands of a Russian state corporation.
It could be argued that the technology argument is the least sensitive, the Russians are already major processors of uranium with a sophisticated and well developed enrichment industry. Would they have access to more sophisticated technology by establishing a plant in the US and hiring American specialists? Some would argue they would, but the issue here may be that Russia typically enriches via the more modern centrifuge route, as does the UK and Japan, but the US predominantly uses gas diffusion technology like France up to a short time ago. The US next generation enrichment facilities are centrifuge, that’s the direction the industry is going in.Ã‚Â Whether it would be advantageous for Rosatom to develop this technology further in a US facility with American staff, we are probably not qualified to judge. It could be the US will benefit from Russian technology transfer rather than the other way round.
The last issue is probably the most sensitive though. Would Russia allow the United States Enrichment Corporation, USEC, to set up shop in Russia, mine local uranium and hire local specialists to develop technologies and run the plant? What do you think?
On balance although allowing the Russian state to set up a major refining operation in an industry as sensitive as uranium enrichment, on American soil, seems a complete non starter, the reality is the US would probably gain more than it would lose from the arrangement that won’t stop the arguments continuing to rage however!