When high-temperature superconductivity meets nuclear fusion!

Author / Pot-wrapped meat under the stars

Edit/Spinach's Starry Sky

Typesetting/hot pot under the stars

At the beginning of 2024, nuclear power ushered in a blockbuster benefit.

Before the New Year's Day (December 6), the Huaneng Shidaowan high-temperature gas-cooled reactor nuclear power plant in mainland China completed the 168-hour continuous operation test and was officially put into commercial operation. This is the world's first fourth-generation nuclear power plant, with a localization rate of more than 90%. This means that the mainland has reached the world's leading level in the field of fourth-generation nuclear power technology.

Image source: Xinhuanet

Not only that, but the commercialization of nuclear fusion, a more cutting-edge technical route for nuclear power, has also been put on the agenda. Controlled nuclear fusion devices are expected to increase the demand for high-temperature superconducting strips. Affected by this, the second-generation high-temperature superconducting strip supplier Yongding Co., Ltd. ((600105) has transformed from a small company with a market value of less than 10 billion yuan to a huge potential stock.

However, the so-called potential does not stand up to scrutiny. At present, Western Superconductor (688122), the only western superconductor in China to realize the commercialization of superconducting wires, is also limited to the field of low-temperature superconductivity. As for high-temperature superconductivity, there is no word for it. In addition to the ethereal high-temperature superconductivity, the main business of Yongding shares can be described as bleak.

1. High-temperature superconductivity, ethereal

Let's take a moment to understand what superconductivity is and what does it have to do with nuclear power?

As we all know, there are two ways in which nuclear energy can release energy, one is nuclear fission and the other is nuclear fusion. At present, nuclear power mainly uses nuclear fission. However, nuclear fusion is actually a better solution, its energy released by the same fuel is much higher than that of nuclear fission, and the raw materials are easy to obtain, the economy is good, and there will be no similar fission accidents in operation, which is safe and reliable.

Put simply, nuclear fusion is more efficient, less costly, and safer. The only downside to nuclear fusion is that it's too difficult to achieve.

To achieve controlled nuclear fusion on Earth, it is necessary to confine high-temperature plasma, including gravitational constraints, magnetic field constraints, and inertial constraints. Among them, magnetic confinement is the main development technology route of the mainland. The device used to restrain the motion of protons through a magnetic field is called a tokamak.

At this point, superconducting materials come into play.

Superconducting materials have zero resistance, complete diamagnetism, and macroscopic quantum effects that conventional materials do not have, and can provide a stronger magnetic field for nuclear fusion reactions. At present, the world's largest international thermonuclear experimental reactor ITER project, a superconducting tokamak that can produce large-scale nuclear fusion reactions, commonly known as the "artificial sun", uses two superconducting wires, NbTi and Nb3Sn.

It is worth mentioning that Continental undertakes 69% of the production of NbTi superconducting wires and 7% of Nb3Sn superconducting wires, all of which are provided by Western Superconductor.

It should be said that the original western superconductor was born for this purpose. Today, Western Superconductor is also the only company in China that has realized the commercialization of superconductivity, but only low-temperature superconducting materials.

Superconducting materials need to be at extremely low temperatures to maintain a superconducting state. According to the level of critical temperature, superconductors are further divided into high-temperature superconductivity and low-temperature superconductivity. In general, Tc (critical temperature)

-248.15℃）。

Therefore, compared with low-temperature superconductivity, high-temperature superconductivity can greatly reduce the cost of refrigeration, and the strength of the stable magnetic field can be higher, which can greatly reduce the volume of tokamak devices (TFR, commonly used devices for nuclear reactions).

If the magnetic confinement fusion device can break through the problem of miniaturization, it will be a big step forward in the commercial application of nuclear fusion. If nuclear fusion can be commercialized, it will completely disrupt the entire energy industry.

When you think about it this way, it seems that high-temperature superconductivity really has a huge market potential.

But it's all based on ideals, even fantasies. And back to reality:

First, the large-scale preparation technology of high-temperature superconducting strip is not yet mature, and the production cost is high. At present, high-temperature superconductivity has not been commercialized on a large scale, and its preparation difficulty can be imagined.

Second, the miniaturization of restraint devices may be one of the factors affecting the implementation of nuclear fusion applications, but it is by no means the only one. At present, the nuclear fission power station has been able to achieve stable operation throughout the year, and the current record of the highest stable operation of nuclear fusion is maintained at 120 million °C, which is maintained for 403 seconds.

Source: Haitong International

It can be seen that controlled nuclear fusion is still 108,000 miles away from commercialization. What is the market potential of high-temperature superconductivity, which is an important application scenario and still has its own technical bottlenecks?

Second, the main business is bleak

In addition to the high-temperature superconducting business, which only sees input but no output, the main income of Etern Co., Ltd. comes from the field of optical communication and power transmission. In the first half of 2023, automotive cables and overseas power engineering contracts accounted for about 65% of the total revenue, and optical cables and communication equipment accounted for about 31%.

Yongding shares in the optical communication and power transmission market wide net, but from the results, it is not satisfactory. In the first half of 2023, the revenue of automotive cables, optical cables and communication equipment decreased by 8.05% and 4.63% year-on-year, respectively, and two of the three major businesses have declined.

Source: Yongding shares public data collation

As for the overseas engineering contracting business, the revenue in the first half of 2023 will be 545 million, a year-on-year increase of 26.76%. At first glance, it looks good, but in fact, as early as the first half of 2021, the overseas engineering contracting business has achieved a revenue of 792 million.

It can be seen that the three major business segments of Yongding shares are weak across the board. Not only that, but each business is not highly profitable. According to the data of the third quarter report of 2023, the comprehensive gross profit margin of Yongding shares is only 16.31%, and the net profit margin is 3.36%.

Behind the 3.36% net profit margin, investment income accounts for 2% of revenue, and other income accounts for 1% of revenue (according to the semi-annual report, other income is mainly government subsidies). From the perspective of actual operation, Yongding shares have always hovered on the verge of breakeven.

Source: Yongding 2023 semi-annual report

In contrast, Western Superconductor has achieved commercialization, at least by virtue of low-temperature superconductivity. However, the downstream application scenarios are limited, mainly used in large scientific engineering projects and medical magnetic resonance imaging devices, accounting for only about 2% of the company's total revenue.

Today, Western Superconductor, which started from the low-temperature superconducting track, has extended its business to titanium alloys and other fields. According to the 2023 semi-annual report, the total revenue of Western Superconducting high-end titanium alloy and high-performance superalloy materials exceeded 1.6 billion, accounting for more than 76% of the total revenue.

However, Western Superconductor's high-end titanium alloy and high-performance superalloy materials are mainly used in the field of military aviation.

The author has analyzed in the article "Western Superconductor VS Baoti - High-end Titanium Duopoly, Who is Better?", the development and verification cycle of military products is long, and the payment cycle is long, and Western Superconductor has both cash flow pressure and performance fluctuation risks. In the first three quarters of 2023, Western Superconductor's revenue and profit both declined, with a year-on-year increase of -5.47% and -35.12% respectively.

Source: Straight Flush - Western Superconductor

3. Out of reach, painting bread to satisfy hunger

The word superconductivity carries considerable weight in the capital market. Enterprises linked to the concept of superconductivity seem to have unlimited imagination.

Western superconductivity is the only existence in the low-temperature superconducting track, but even so, it is still difficult to rely on superconductivity alone. Low-temperature superconductivity has been successfully commercialized, but behind the commercialization, it is very dependent on scientific engineering projects. With the completion of the ITER project, the revenue of ITER wire rod with high gross margin has gradually declined.

In recent years, Western Superconductor has also been actively carrying out the research and development and engineering of new high-temperature superconducting materials, but there are obviously no substantial achievements.

Source: Straight Flush iFinD - interactive Q&A platform

High-temperature superconductivity, whether it is its own technology or downstream application scenarios, is far from mature. Nuclear fusion, with high hopes, is still out of reach.

It's good to have expectations, but if it's just an illusory illusion, I'm afraid that one day it will be shattered.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.