Medical cobalt industry tackles supply shortage

Growth in the global healthcare sector is increasing demand for cobalt products from the medical industry, but the market is expected to remain undersupplied in the coming years as it competes with other applications.

Cobalt-60, which is used in the sterilisation of medical equipment and in radiosurgery devices, is produced in nuclear reactors using cobalt targets in the form of pellets and slugs. Supply of the raw material has tightened since 2014, when there were disruptions to mining output and investors started to anticipate growing demand from the electric vehicle industry.

Demand for medical equipment sterilisation is rising owing to innovation in the development of new medical and pharmaceutical devices, expanding availability of healthcare services globally, an ageing population and an increase in chronic diseases, US-based sterilisation provider Sotera Health said. Demand for sterilisation of single-use medical equipment has accelerated in 2020 owing to the Covid-19 pandemic.

Through its Nordion subsidiary, Sotera has long-term contracts with three nuclear operators running to between 2024 and 2064 to procure cobalt-60 from 14 nuclear reactors at four plants in Canada and Russia by providing the cobalt targets. It acquires additional supply from reactors in Russia, China and India.

Only 9pc of nuclear reactors worldwide are the type that are capable of producing commercial quantities of cobalt-60. Sotera expects the industry to be slightly undersupplied in the coming years. "We estimate that there is about 5pc less cobalt globally today than the market wants," Richard Wiens, director of strategic supply at Nordion, said recently.

Nordion noted that it procures around 20pc of its cobalt-60 supply from Russian nuclear reactors, but over the next few years there will be periods when planned or unplanned outages and variability in supply from individual reactors could lift the share to as much as 50pc, increasing the risk of supply disruption. If the US, Canada and the EU expand sanctions against Russian government-owned operations, restrictions on business with Russian nuclear reactor operators could prevent Nordion from procuring that supply.

Sotera plans to use part of the proceeds of its IPO launched on 20 November to invest more than $100mn in several projects to increase Western cobalt-60 production capacity. "From time to time we also purchase Co-60 on the spot market and will continue to explore opportunities for supply in the global market," Sotera said in its initial public offering filing.

In February 2020, Nordion announced a collaboration with US nuclear power company Westinghouse Electric to develop technology to produce cobalt-60 at reactors in the US to diversify its supply with domestic partners. In December 2018, Nordion acquired patents with the aim of substantially increasing its sourcing options for cobalt-60. Nordion has a conversion project under way at reactors in Canada and is conducting a feasibility study with Societatea Nationala Nuclearelectrica (SNN) in Romania into the possibility of producing cobalt-60 from its Cernavoda reactors. Nuclear operator Bruce Power in Canada, which supplies Nordion, completed its second cobalt-60 harvest of the year in October and is looking at ways to increase output.

In 2017, Nordion's Russian suppliers expanded production capacity, which will begin increasing supply in 2022. Conversion of cobalt targets into cobalt-60 can take between 18 months and five years, depending on the type of reactor and the location of the cobalt in the reactor.

Cobalt-60 output from the US Department of Energy's Advanced Test Reactor (ATR) has been delayed from the end of 2019 until the second quarter of 2021. International Isotopes, which supplies the cobalt targets for the ATR, said that the delay is owing to extended reactor shutdowns and lower than expected production rates of cobalt-60 from a new design of cobalt targets.

International Isotopes entered cobalt-60 supply agreements with several customers in 2015 as the market tightened. The terms of the agreements require pre-payments to secure cobalt material in future years.

International Isotopes has a 10-year contract with the Department of Energy for cobalt-60 production that runs until 2024. The company purchases cobalt targets for a fixed price that increases by 5pc annually. There is an option to extend the contract beyond 2024, although the Department of Energy can end the contract for reasons of national defence, security or environmental safety.

International Isotopes reported a 56pc year-on-year increase in revenue from cobalt products in the first nine months of the year to $1.08mn, owing to timing of cobalt demand and its ability to procure material for this demand. The company's net income for cobalt products rose by 53pc to $542,394 on the higher revenue and recognition of income for cobalt provided under its supply agreements.

Nordion's net revenues decreased by 6.4pc to $86mn for nine-month period relating to timing of medical use cobalt-60 sales due to Covid-19 and the scheduled timing of cobalt-60 harvest and customer deliveries for industrial use, partially offsetting an increase in pricing.

By Nicole Willing