Before it can be used as nuclear fuel, most of the world’s U3O8  must be fluorinated at a so-called conversion facility. Fluorination further purifies the uranium, and in the form of uranium hexafluoride (or UF6), the uranium is now in the ideal chemical form for the next step in the value chain, enrichment (see below).

There are four such conversion facilities in the Western world (one each in the U.S., Canada, U.K. and France), plus Russia and China. Conversion services are priced by the kilogram of elemental uranium being converted out of U3O8 and into UF6.  Utilities typically execute multi-year conversion services contracts with start dates two or more years in the future. Pre-existing inventories of UF6 also facilitate a near-term spot market in conversion services, however.

Besides acting as purveyors of a highly specialized chemical process, the converters play a pivotal role as storage and transshipment points for commercial uranium.

Uranium producers, nuclear utilities, market intermediaries and other commercial parties maintain storage agreements with one or more converters. With a few notable exceptions (such as deliveries to China and India), most commercial transactions in U3O8 specify the premises of a converter as the delivery point. These storage agreements make it very convenient for parties in the fuel chain to buy and sell to each other by “book transfer” at a given converter location, eliminating the need for a physical shipment.