According to China’s latest National Nuclear Power Development Plan, China will increase its nuclear power installation capacity from the current capacity of less than 10,000 megawatt hours(mwh) to 70,000-80,000 mwh by 2020, representing an astounding 22% annual growth rate. The Chinese government will pump $110 billion into new nuclear power plant (NPP) projects around China by 2020, of which $50 billion will be for equipment procurement. This will create a market of approximately $15 billion for foreign suppliers after taking into consideration that China mandates a minimum of 70% of equipment be sourced locally. Nearly one half (47 percent) of the total nuclear generating capacity set to come online in China by 2020 will likely be concentrated in the four southern provinces of Guangdong, Fujian, Guangxi and Hainan. This is due to a number of factors including access to abundant coastal water resources, proximity to megacities and energy consumption hubs, the scarcity of indigenous coal resources, and stable seismic conditions.
Three companies in are China authorized to design and build nuclear power facilities, China National Nuclear Corporation (CNNC), State Nuclear Technology Corporation (SNTC), and the China Guangdong Nuclear Power Corporation (CGNPC); these three represent the only three potential buyers for U.S. producers of NPP equipment hoping to export to China. These three giants are all state owned enterprises (SOEs) directly administered by the State Council – the Chinese cabinet. In practice, the Chinese central government and the three giant SOEs work together to decide on NPP planning, cooperation with foreign companies, trade within the business, and technology and equipment selection.
The buying needs of these three Chinese SOEs can be broken into three parts: 1) the upstreammarket, including fuel (uranium), nuclear reaction coolants, zirconium alloys for fuel rod claddings,and graphite reaction moderator rods; 2) the interim stream portion, including nuclear islands,conventional islands and accessories; and 3) the downstream portion, including opportunities for exports in managerial and operational services and parts used in systems outside the reactor core.Opportunities for U.S. exports are abundant throughout these three parts, particularly because of the high reputation of U.S. nuclear technology.
China is only somewhat self sufficient in the upstream market of raw materials used in nuclear power plants. Chinese mines produce 70% of the uranium used in Chinese reactors, while China imports the remaining 30% from Kazakhstan and Australia.2 Chinese imports of U.S. graphite moderator rods recently increased. China is now the third largest buyer after Japan and Canada ofU.S. graphite. In the first quarter of 2010, U.S. graphite exports to China increased by 196.63% torepresent nearly 13% of the total U.S. graphite exports.
The interim portion of the NPP business chain represents the largest current opportunity for U.S.exporters. Under China’s mammoth nuclear energy expansion, China is building plants of two basic types. The first are Generation II reactors based on technology already mastered by Chinese domestic producers. The second variety of are Generation III reactors, for which China is still largely dependent on foreign suppliers. Currently, China plans to manufacture 50% - 60% of theunits domestically based on the older Gen. II technology, leaving 40% - 50% of the market for Gen.III nuclear equipment imports, an estimated $15 billion in market value, as previously stated.In the downstream market, similar to the interim market, the quality of products produced by most Chinese domestic manufacturers does not meet the demand of Chinese buyers. The best prospects for U.S. exporters in this portion are nuclear pumps and valves, breakers, large forging parts, and other accessories.