At the recent Wind3C meeting, a number of analysts from China Post Securities Nonferrous Metals, Military Industry, and Dianxin jointly brought the theme interpretation of "Nuclear Power Industry Chain: A Model of Military Technology and Civilian Use, the Third Generation of Nuclear Power is the Mainstream of Construction, and the Fourth Generation of Nuclear Power Accelerates Development".
The main point of the meeting is that the uranium price in the upstream of the nuclear power industry chain has room for a sharp price increase. The mainland's nuclear power technology has moved from following to leading, the approval of the third generation of nuclear power has accelerated, the localization rate has continued to increase, and the fourth generation of nuclear power demonstration projects have been connected to the grid one after another, focusing on investment opportunities in the industrial chain.
Uranium prices have room to rise sharply //
Li Shuaihua, chief analyst of nonferrous new materials, shared the investment opportunities of uranium mines upstream of nuclear power, and uranium mines are used as nuclear power fuels. On the supply side, after the Fukushima nuclear power plant accident in 2011, the uranium exploration index has been falling until around 2021. Because it takes about 10 to 15 years for uranium ore to go from exploration to production. Generally speaking, the longer copper mine is 5 to 8 years, which is about 5 years longer than the copper mine, so the decline in exploration expenditure in previous years has irreversibly led to a decline in uranium production in the future.
Demand is growing, and many authorities predict that the uranium gap will increase after 2025. Since 2016, there has been a relatively large shortfall in natural uranium (primary supply), almost 10,000 to 15,000 tons per year. This gap is made up by secondary supply. The secondary supply is mainly government stocks and some concentrator materials, which can be called recycling. As a result, the current secondary supply is also a record low. On current trends, it could fall to a particularly low level in another two to three years. There is a shortage of more than 10,000 tons per year for a single supply, and the current inventory is about 60 million pounds, equivalent to more than 30,000 tons. If more than 10,000 tons are consumed per year, stocks will be quickly depleted. Therefore, we feel that the supply has ushered in a relatively large inflection point, and the pattern of uranium ore supply and demand is now a very good time. Some people may wonder if there is not a gap in 2025, why do you feel that there is an opportunity now? Because the investment cycle of uranium ore is relatively long.
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Why are we bullish on uranium now? Like many varieties of non-ferrous metals, if the price increase is likely to suppress demand, it will set a ceiling on the price, and the price may not rise too much. Because uranium accounts for between 5% and 10% of the cost of nuclear power, the calculation method may be different for different reactors. In other words, it is less cost-sensitive. As the demand for nuclear power continues to grow, uranium prices have room for a significant increase, and it is possible to double or double the price. However, on the other hand, other non-ferrous varieties, under the current conditions, if they want to rise by 1 times, 2 times or 50%, they feel that they cannot withstand scrutiny.
The approval of the third generation of nuclear power in mainland China has accelerated, and the localization rate has continued to increase //
Ma Qiang, an analyst of the military industry, explained the development of the nuclear power industry that the use of nuclear energy has historically been a model of military technology and civilian use. The earliest nuclear power reactor technology was developed on the basis of the technology of military production reactors and military ship power reactors. By the end of 2022, there were more than 400 nuclear power plant units in operation worldwide, with a total installed capacity of nearly 400GW. Nuclear power accounts for about 10% of global electricity generation, and because its carbon emissions are lower than those of thermal power, lower than that of gas turbines, and even lower than wind and photovoltaics, it is clearly defined as clean energy. Nuclear power has strong competitiveness as baseload power.
According to the International Energy Agency's Electricity Market Report 2023, global nuclear power is expected to grow at an average annual rate of 4% from 2023 to 2025. By 2025, more than half of the global increase in nuclear power will be mainly contributed by four countries: China, India, Japan and South Korea, with China leading the way in absolute increments, adding 58 billion kWh.
(Image from: Hailuo Creative)
In terms of third-generation nuclear power, third-generation pressurized water reactor nuclear power is the main force in the development of nuclear energy in mainland China by 2030. The domestic independent nuclear power technology "Hualong No. 1" is the main type of nuclear power unit approved in China. Domestic third-generation nuclear power equipment suppliers will also benefit from the growth of start-up units in recent years and the increase in demand brought about by the increase in the localization rate of units.
From 2016 to 2018, domestic nuclear power experienced three years of "zero approval" in terms of the number of units started. In 2019, with the start of nuclear power projects in Zhangzhou, Fujian Province and Taipingling Nuclear Power Project in Guangdong, it marked the beginning of the resumption of new nuclear power plants in China after three years of "zero approval". In 2018, there were only 13 nuclear power units under construction in mainland China, with an installed capacity of 14GW; By the end of 2022, we had 23 units under construction with an installed capacity of 25GW, an increase of 82% compared to 2018, and the restart of nuclear power in China is underway.
From 2019 to 2022, the number of newly started nuclear power units in mainland China is 2, 4, 6 and 5 respectively. So far in 2023, 6 new units have been started. From the perspective of demand, the number of new nuclear power units in China will reach 8 units every year. Since the supply of equipment is 2-3 years later than the start of the unit, it is expected that the increase in the number of nuclear power units started since 2019 will be reflected 2-3 years later than the increase in the supply of nuclear power equipment from 2021 to 2022.
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