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Zirconium in pole position in nuclear boom

LONDON (Reuters) - The nuclear industry is set to boom and minor metal zirconium, crucial in the energy creation process, will be in big demand so abundant supplies now should not be taken for granted.

Part of the Sizewell B power station is seen in Suffolk, Britain May 22, 2007. REUTERS/Kieran Doherty

After years in the wilderness, nuclear energy is making a comeback. The need to curb emissions from burning carbon fuels such as oil and coal is a major driver of surging interest.

"The worldwide nuclear renaissance will inevitably cause an increasing demand for zirconium," said French nuclear power specialist Cezus-Areva CEPFi.PA.

Nuclear grade zirconium clads the fuel rods which contain uranium pellets to create fission, or split the atom, and generate heat, which with water produces steam and drives the turbine to produce electricity.

There are more than 40 nuclear power plants under construction in 12 countries, another 110 are planned and 272 are proposed, according to the World Nuclear Association. Most are expected to use uranium to fuel energy production.

Plans are afoot to expand capacity, but the technology to make zirconium is limited to a few firms, projects are capital intensive and take a long time.

If producers have difficulty keeping up with demand in the future, nuclear power generating firms could find themselves scrambling for the silvery grey metal.

“If demand truly materialises as the numbers from World Nuclear Association indicate ... There is potential for zirconium alloy shortages,” said Jonathan Hinze a vice-president at the Ux Consulting Company.

“But, given the oversupply and long lead times in nuclear power along with the current environment, it is hard to be bullish,” he said, referring to the global economic downturn.

URGENT

Some think the rate at which new nuclear power stations are built could slow for a couple of years, while governments battle with probably the worst slowdown since the 1930s.

But others say the need for nuclear power is urgent.

Many countries including Britain could be facing power shortages within decades unless reactors are built quickly, which would also help meet emissions reduction targets set under the Kyoto Protocol.

An accelerated building programme could mean crunch time for the zirconium market comes sooner than expected and result in surging demand and prices, and a search for alternatives is likely to be futile.

"Zirconium is the only proven alternative as far as the industry is concerned," said British Energy, part of France's EDF Energy EDF.PA.

Zirconium is used because fuel rods have to last for six years or more in a high temperature, high pressure, high radiation environment without failure, and no other metal can match its low neutron -- released during fission -- absorption qualities.

The amount of zirconium used varies according to the type of reactor. According to U.S.-based Ux Consulting boiling water reactors contain about 44 tonnes of zirconium, while pressurised heavy water reactors use about 12.5 tonnes.

Cezus-Areva estimates it supplies about 40 percent of global demand for the zirconium market estimated at around 5,000 tonne.

Ux Consulting agrees with that figure and estimates global production capacity at 8,600 tonnes a year. It also expects demand to rise to 6,500 tonnes in five years.

Prices are hard to pinpoint as most zirconium is sold on long term contracts and the industry is secretive.

However, Anthony Lipmann, owner of UK-based minor metals trading firm Lipmann Walton estimates prices of nuclear grade zirconium sponge at between $60 to $80 a kg, up from $40 a kg five years ago.

“Forty years ago people were so afraid of nuclear that it wasn’t allowed to grow and now people are more worried about climate change,” Lipmann said.

“It wasn’t politically acceptable to even discuss nuclear over the last 40 years. It is a shame policy on something as important as nuclear power appears to be created on the hoof.”

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