Trade War Spills Into Uranium as U.S. Weighs Import Tariffs
(Bloomberg) -- The Trump administration opened an investigation into whether uranium imports threaten national security, a move that may lead to tariffs on the nuclear power plant fuel. U.S. uranium miners rallied on the news while utilities that operate reactors slipped.
The Commerce Department said Wednesday it will probe “whether the present quantity and circumstances of uranium ore and product imports into the U.S. threaten to impair the national security.” The probe will cover the entire uranium sector, from the mining industry to enrichment, defense and industrial consumption, the department said.
The investigation adds to trade tensions that the International Monetary Fund warns represents the biggest risk to the global economy. Imposing uranium duties would also deal another blow to nuclear power plants already struggling with low electricity prices and flat demand. U.S. uranium miners supply less than 5 percent of domestic consumption for the metal and say it’s increasingly difficult to compete with state-subsidized companies abroad. Still, a trade group that represents nuclear power generators says the government should consider the interests of both suppliers and users of the metal.
“We urge the federal government to take appropriate action, without harming the fleet of nuclear reactors,” Maria Korsnick, chief executive officer of the Washington-based Nuclear Energy Institute, said in an emailed statement. “Potential remedies could put even more generating units at risk.”
The department will investigate the matter under Section 232 of the 1962 Trade Expansion Act. The provision allows for duties without a vote by Congress if imports are deemed a national-security threat, and was used this year to slap tariffs on steel and aluminum imports. The U.S. uranium industry wants the government to shield it from competition from state-owned companies in countries including Russia and Kazakhstan.
“This may be the closest issue to what most reasonable people might think as national security,” analysts at Brown Brothers Harriman said in a research note before the decision was announced. “Some foreign producers are state owned, which pose a competitive challenge.”
U.S. uranium miners Energy Fuels Inc. and Ur-Energy Inc., which petitioned the Commerce Department in January for the probe, surged. Energy Fuels rose as much as 14 percent after the announcement and Ur-Energy gained as much as 12 percent.
Entergy Corp. and FirstEnergy Corp., operators of nuclear power plants, were among the biggest decliners on the S&P 500 Utilities index, falling as much as 1.7 percent and 1.9 percent respectively. Nuclear generator Exelon Corp. also declined, helping drag the the index down as much as 0.9 percent.
The Defense Department will be consulted about national security requirements for uranium, Commerce Secretary Wilbur Ross said in a separate letter to Defense Secretary James Mattis notifying him of the investigation.
U.S. production of uranium necessary for military and electric power has dropped to 5 percent of domestic consumption, from 49 percent, said Ross. Prices for the commodity have slumped since the 2011 Fukushima disaster led big buyers including Japan and Germany to shut down or decommission reactors. Compounding the problem was a global supply glut that prompted Kazakhstan, the world’s biggest producer, to cut back last year. Canada’s Cameco Corp., the top North American supplier, followed suit in November.
Canada, Kazakhstan, Australia and Russia are among the top sources of U.S. uranium imports, according to the U.S. Energy Information Administration. Almost 90 percent of uranium delivered to U.S. reactors was from foreign nations in 2016, according to the government agency.
“Canadian uranium is not a threat to the national security of the United States,” Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said in an email. “Measures that shut out Canadian uranium imports would harm U.S. reactors.”
The U.S. probed uranium imports under the same legal provision in 1989, but found that foreign shipments didn’t threaten American national security. The conclusion may be different this time.
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