Our activities in the fuel services industry include participation in uranium refining, conversion and fuel manufacturing.

The industry practice for measuring conversion services is kilograms of uranium (kgU) rather than pounds of U₃O₈. For example, 66 million kgU is equivalent to about 172 million pounds of U₃O₈.

The following sections discuss the conversion services market only, as information on the other segments of the fuel services industry is not publicly available.

Conversion Services Demand

World demand for UF₆ and natural UO₂ conversion services was estimated to be about 66 million kgU in 2008. Western world demand accounted for about 58 million kgU, with the remaining 8 million kgU coming from the non-western world (Russia, China and eastern Europe).

Over the next 10 years, world demand is expected to increase by 32% to about 87 million kgU. In 2009, total world conversion services demand is expected to increase by 5%.

Conversion Services Supply

The western world UF₆ conversion industry consists of Cameco and three other significant producers, with an annual nameplate conversion capacity of about 51 million kgU. In 2005, Cameco signed a toll-conversion agreement to acquire UF₆ conversion services from one of these other converters, SFL in Lancashire, United Kingdom. Under the 10-year agreement, SFL will annually convert a base quantity of up to 5 million kgU to UF₆ for Cameco. Cameco's Canadian UF₆ plant capacity, coupled with our toll-conversion capacity with SFL, accounts for about 35% of the western world UF₆ nameplate conversion capacity.

In addition, supplies are available from secondary sources, including excess western inventories, Russian sales in the form of low enriched uranium, Russian re-enriched depleted tails, and Russian and US uranium derived from dismantling nuclear weapons. Russia supplies most of the UF₆ conversion requirements of the former Soviet Union and eastern Europe in the form of low enriched uranium.

Conversion Services Markets

Utilities contract a substantial percentage of their UF₆ conversion services through long-term contracts, purchasing the remainder on the spot market. Cameco is the only commercial supplier in the world of conversion for natural UO₂ customers. In addition to the Canadian requirements, Cameco also exports UO₂ to South Korea for its Candu reactors and to the US and Japan for use as blanket fuel in boiling water reactors. Cameco also sells conversion services packaged with U₃O₈ as a UF₆ or UO₂ product.

Spot/Long-Term UF₆ Conversion Market

In 2008, spot market prices decreased for North American UF₆ conversion services and for European UF₆ conversion services year-over-year. Outlined below are the industry average spot market prices (TradeTech and UxC) for North American and European UF₆ conversion services as at the dates specified.

Outlined in the following table are the industry average long-term prices (TradeTech and UxC) for North American and European conversion services as at the dates specified. The industry does not publish spot or long-term UO₂ prices.