If the U.S. government starts buying uranium from domestic producers, it may need to pay substantially more than current spot uranium prices to incentivize an increase in U.S. uranium production, according to some uranium mining experts.
Earlier this year, President Donald Trump tasked a working group to come up with policy options aimed at supporting the nuclear fuel industry after deciding against domestic protections based on recommendations of a national security investigation into U.S. uranium imports.
While the working group's progress on the recommendations is not publicly known, Bloomberg News recently reported that the group is proposing that the U.S. buy more uranium from domestic producers, possibly through a new federal stockpile.
The Bloomberg report has raised the hopes of U.S. miners, which supply a small fraction of the country's uranium needs, about a new source of demand. It has also raised questions about how such a mechanism would work if pursued.
"When it comes to logistics we will see," Eight Capital analyst David Talbot said in an email. "Who gets to sell uranium and at what prices?"
Scott Melbye, executive vice president of Uranium Energy Corp., said the U.S. government would have to pay higher prices than current uranium spot prices averaging about US$25 per pound if it wants to see the domestic uranium mining industry grow. Melbye said uranium prices of between US$40/lb and US$60/lb would drive growth in the U.S.
"If there is government support for domestic mining at US$50/lb, we shouldn't think it's outrageous," Melbye said. "That's pretty much the incentive prize for most production."
Citing low prices, major uranium producers have idled production in recent years. Cameco Corp. President and CEO Timothy Gitzel said uranium prices need to be over US$40/lb for the company to consider restarting idled mines, which includes U.S. facilities.
In Cameco's case, a return to U.S. production would take 18 to 24 months and longer than that for operations to hit historical production rates of 2 million to 3 million pounds of uranium per year, a company spokesperson said in an email.
However, it is unclear if Trump will act on potential recommendations from the working group.
Amid impeachment proceedings and other higher-profile policy issues, Katie Tubb, a senior energy and environment policy analyst with the Heritage Foundation, said a decision about the nuclear fuel industry may not be a high priority for Trump.
"I don't think it's on the radar," Tubb said. The analyst noted that Trump is not under a legal requirement to make a decision and that the working group's recommendations may never be made public.
The National Security Council declined to comment on the timing of the recommendations.
If Trump chooses to act, Tubb said the president could order domestic purchases under the Defense Production Act without congressional approval. But if Trump sought other policies, such as boosting U.S. nuclear fuel processing capacity, support from Congress would be needed.
Melbye said a stockpile was a sensible option for the U.S. to secure its uranium needs in the defense sector. But Melbye and other experts Market Intelligence contacted stressed that it remains to be seen if any policy flows from the working group's recommendations.
"We're holding our applause until the White House comes out with its decision," Melbye said.