China’s Insatiable Demand for Uranium

By Alex Liao

China’s long-term commitment to nuclear energy currently remains intact despite the recent Japanese reactor crisis. Chinese officials are anticipated to reveal a new 2020 capacity target of about 75 gigawatts, only a slight revision down from earlier estimates of 80-90 gigawatts. With China’s totaled installed nuclear capacity at merely 10.8 gigawatts at the end of 2010, this represents a significant shift in China’s energy policy. Indeed, China’s National Development and Reform Commission identified the nuclear sector as an area for future investment, particularly in nuclear reactor technology. Along with promised advances in uranium isotope separation, nuclear fuel disposal, and radiation protection, China’s focus on nuclear energy appears increasingly palpable.

Corresponding with this energy initiative is China’s search for uranium resources. Because 27 of 110 additional reactors are already under construction, and the country’s 12th Five Year Plan aims to raise nuclear power to 6% of all Chinese electricity, China has actively sought uranium both on a domestic level and on world markets. Hence, domestic mines under the direction of state-owned China National Nuclear Corporation and China Guangdong Nuclear Power Group have been developed across the country. Meanwhile, uranium imports tripled in 2010 to 17,136 tons, comprising resources from Central Asia, Africa, and Australia.

On the domestic front, China’s uranium deposits are largely concentrated in three regions: Southeast China, Northeast China-Inner Mongolia, and Northwest China. As Southeast China has historically been the location of uranium mines, the latter two locations have been seen as the areas which possess great potential in the future. As such, exploration has been concentrated in these regions. Recently, China Guangdong Nuclear Power Group announced the development of two large mines in south China and northwest China, and projects have begun in Inner Mongolia as well. This signals China’s expressed and continued interest in domestic uranium production.

Historically, China has additionally relied on Tibetan uranium, capitalizing on more than 200 deposits that were found prior to 2000. The Tibetan example epitomizes China’s perspective on uranium mining, with frequent claims of ecocide and poor safety conditions. These claims are not unfounded. Environmental degradation through accidental spills, irresponsible radioactive waste management, and deforestation has devastated the landscape. Uranium seeping into groundwater has resulted in a nascent, though largely undocumented, decline in babies surviving birth. International law on this issue, as embodied in far-ranging documents from the Universal Declaration of Human Rights to the Basel Convention Ban Amendment on the transport of hazardous wastes, has not offered sufficient enforcement mechanisms to ensure compliance. Hence, uranium mining interests have thus far trumped any labor and environmental concerns, which could foment future complications in the domestic industry.

Environmental concerns, however, must be placed within the context of China’s shift from coal to nuclear energy. While environmental degradation from uranium mines must be avoided if possible, it still represents the lesser of two evils in that the environmental damage remains largely localized in specific areas. Thus, on the whole, China’s push for uranium can be characterized as a step forward in environmental protection. Environmental considerations, then, do not pose an immediate threat to Chinese uranium mining interests.

Nevertheless, China possesses poor uranium resources, accounting for a paltry 0.7% of the estimated world total. In contrast to its ambitions, uranium output in 2008 was only 769 tons, or 1.8% of global production. While domestic supplies were sufficient for 2010 demand, China expects a tenfold increase in nuclear capacity and in turn, uranium demand. Based on calculations of China’s uranium demand in 2020 from data on planned nuclear reactors, China’s demand would exceed its own resource extent by more than 20%. Even factoring in new discoveries in uranium exploration, demand would far outstrip supply due to the lag between exploration and production.

In a similar vein, although Chinese scientists have recently announced their mastery of nuclear fuel reprocessing technology, the prospect of this approach becoming a substantial aspect of China’s uranium pursuit remains dim. Reprocessing uranium costs significantly greater than purchasing uranium and storing the spent fuel. Moreover, the process, which China would perform domestically, would likely provoke international criticism since it also produces extracted plutonium. With American and European fears over China’s relationships with North Korea, Iran, and Myanmar, reprocessing would only be accomplished on a much smaller scale than would be necessary to meet demand, in order to minimize the risk of nuclear theft or terrorism. Another impediment is the need to build a dangerous breeder reactor – one whose costs would outweigh any benefits. Instead, Matthew Bunn, an expert on the Chinese nuclear program at Harvard University, noted that it would be more prudent for China to wait until cheaper and safer technologies are developed.

From this perspective, while domestically mining uranium provides a preferable alternative to political wrangling of foreign deals, foreign uranium will inevitably constitute an integral role in China’s push for nuclear energy. Complications are prevalent in the countries China purchases uranium from, ranging from corruption to political instability. As these purchases increase in the coming years, tensions will continue due to the volatility in Central Asia and Africa, both regions in which China has been heavily investing.

In line with energy and raw materials purchases in Central Asia, China National Nuclear Corporation and China Guangdong Nuclear Power Corporation currently hold stakes and contracts for uranium mines in Kazakhstan. Likewise, prospecting has begun in neighboring Uzbekistan and state-owned Sinosteel has partnered with an Australian company to begin prospecting in Kyrgyzstan. The underdeveloped energy infrastructure in the region has necessitated additional Chinese investment, furthering ties between the nations. For instance, gas pipelines and hydroelectric power stations have been funded in Kazakhstan, where China accounts for 26% of total foreign investment. This dependence will ensure that China continues to consume Central Asian uranium in the future.

Heavy competition permeates the Central Asian uranium industry, however. Russia and Japan will require significant uranium supplies in the near future, creating strategic resource concerns in the region. Kazakhstan currently resolves this by pursuing a balancing strategy, holding lucrative relationships with Russia, Japan, and China. This creates the opportunity for volatility if domestic instability hampers the Kazakh uranium supply. Already, anti-nuclear sentiments have built up over the Japanese nuclear reactor crises, and poor environmental and safety conditions could threaten long-term productivity. China has sought to settle this dilemma by partnering with state-owned Kazatomprom, though Russia has provided an attractive alternative in its promise to enrich Kazakh uranium and build nuclear reactors. This situation will likely amplify diplomatic tensions in the region, as countries such as Mongolia have already been caught in the Sino-Russian bind. China will need to carefully exercise diplomacy and establish clear economic ties with all regional players, in order to reduce the possibility of escalatory events due to supply shocks.

The same trend repeats itself in Africa. China holds a joint-venture agreement to mine uranium in Zimbabwe, where the potential of 455,000 tons of uranium lies. Similarly, millions have been poured into Niger, the sixth-largest uranium producer in 2008. Competition from Russia and other foreign companies has prompted China to strike deals with French-owned Areva to supply 20,000 tons of uranium over 10 years. Areva has prospected or begun mining uranium in Niger, the Central African Republic, the Democratic Republic of the Congo, Tanzania, and Namibia. By working with foreign companies, China has gained valuable support, insight, and knowledge in its drive for uranium.

Corruption and political instability stand out in the African landscape. Chinese development of uranium resources in Africa is frequently accompanied by funds for infrastructure investment projects. Bilateral trade increases at a rate of 44% each year, strengthening the influence of Chinese aid. However, unlike Western aid, few strings are attached to this money, granting autocrats free reign to entrench their power. More importantly, these funds allow African regimes to dilute the effect of sanctions, circumventing Western attempts to promote the human rights apparatus. Hence, Chinese investment abrogates any responsibility for political reform. Instead, entrenched local bitterness over an African regime would tend to increase instability, potentially in the form of backlash.

Regional insecurity may alternatively manifest from economic and labor agitation. Chinese companies have provoked anger in the African workforce due to their imposition of poor working conditions and the lack of adequate labor rights. For instance, several managers have reneged on labor contracts and stifled union activities. As workers lash out through protests, political pressure falls on politicians, as happened in Zambia over coal mine protests. China has continued to ignore these conflicts, which will likely increase in magnitude as uranium transforms into another hotly contested resource. In Niger, ethnic tensions from mining laborers exploded over uranium exploration, providing an instructive wake up call for Chinese managers. If left untreated, this situation will inflame itself across the country as Chinese corporations already reserve high-level positions for its own nationals. Exploited African populations have already shown their ability to hamper uranium mining, making this issue one of critical importance in the coming years.

Of course, political instability and labor tensions could combine to form China’s largest headache. Chinese executives’ continuing refusals to hold discussions with elected officials makes this difficulty more likely. As communication fragments between the people and their government, destabilization remains an ever-present concern. This poses a great challenge for investment since capital would flow towards more stable ventures.

Nevertheless, the perennial issue in Africa remains its imperialist heritage, and cries of neocolonialism run rampant when foreigners exert any measure of influence. Here, China has adopted a more proactive approach. It has argued that its economic cooperation has benefited Africa, by enabling the building of hospitals, schools, and other infrastructural needs. Moreover, it has consistently deflected criticism of human rights violations, asserting a relativist view that human rights are local conceptions, not universal ones. Therefore, this objection will not hinder future Chinese uranium purchases.

Turning away from the continent, a large portion of China’s current imports hails from Australia as well. The regulations and conditions in this country appear more reassuring. Treaty-level safeguards along with national laws ensure environmental protection, as well as the prohibition of uranium retransfers to third countries. Furthermore, military uranium use is proscribed, and trade is contingent upon IAEA inspections. This model of transparency ensures that Australia will remain a stable uranium trading partner for China.

Nonetheless, nuclear weapons hold their place as the preeminent security concern relating to Chinese foreign policy. However, China’s demand for uranium rarely encounters resistance from this concern, for a variety of reasons. First, China’s ability to produce additional weapons also requires plutonium, which remains in extremely low supply. Nor has China recently ramped up nuclear weapons production. Finally, China’s drive for nuclear energy appears legitimate in the international community such that fears of nuclear weapons will not produce concerns in the near future.

Thus, moving forward, China will need to contend with a scarce and unpredictability volatile supply of uranium both within and without its borders. Although it has procured foreign supplies with relatively little controversy, diplomatic tensions in Central Asia and political instability in Africa must be closely monitored to reduce the potentiality of destabilizing events. Future complications will likely come from foreign areas as global demand increases and uranium prices are driven up; hence, Chinese officials must tailor their quest for uranium to more closely suit both African and Central Asian interests.
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