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China Wants ‘Made in China’ Nuclear Reactors
Foreign Suppliers May Get Left Out; Westinghouse Hands Over Plans
Out of 71 nuclear reactors being built globally, China is constructing 26. The Hongyanhe power station was one of the first to come online in China after the Fukushima disaster. Zuma Press
By Brian Spegele
Dec. 15, 2014 1:49 p.m. ET
BEIJING—When a unit of North Carolina’s Curtiss-Wright Corp. won a roughly $300 million deal in 2007 to supply components for new reactors in China, industry officials trumpeted China’s nuclear boom as good for U.S. business.
Today, Chinese companies are competing for that business—and foreign companies risk getting left out. Meanwhile, Curtiss-Wright’s contract is caught up in a legal dispute, while Chinese authorities blame the company in part for the delay of a landmark nuclear project.
U.S. and other foreign companies are now struggling to keep their hold in China, the industry’s biggest growth market and a rare bright spot more than three years after the Fukushima disaster in Japan put many of the world’s nuclear projects on hold. Yet China is increasingly turning to local companies to build crucial parts for multibillion-dollar nuclear projects, a result of Chinese industrial nationalism and frustration over U.S. supplier problems.
With the global nuclear industry focused on China, the Chinese government has used the heft of its huge market to secure transfers of key technology and gradually localize production. In the process, China is achieving a political aim to source sensitive manufacturing at home and satisfying a practical need to avoid complications posed by faraway suppliers.
One of those supplier issues has surfaced in eastern China’s Zhejiang province, where Pennsylvania’s Westinghouse Electric Co. is building the first of four of its most advanced, commercially available reactor, the AP1000, in China. Local authorities blame two-year delays in part on quality problems related to Curtiss-Wright. In a written statement, Curtiss-Wright said it has “refined and improved our design processes” as a result.
“This sort of thing has damaged U.S. companies’ reputations here,” said Li Ning, a nuclear-industry expert at China’s Xiamen University. “Chinese companies are really growing and basically squeezing out the international suppliers.”
In one case, a specialty part produced by SPX Corp. of Charlotte, N.C., for early AP1000 projects will be supplied by a Chinese state machinery company in future projects, according to State Nuclear Power Technology Corp., a company under China’s central government that is leading the AP1000 rollout. Of the four AP1000 reactors Westinghouse is building in China, the final one will have as many as nine major components supplied by Chinese companies that initially were supplied by foreign firms in the first unit, SNPTC says.
The turnabout illustrates how China is moving swiftly to build a nuclear industry. Already, Westinghouse has provided details of the AP1000 as part of a technology-sharing deal. China plans to use that to build its own reactors that experts say it could sell abroad.
“Folks in the U.S. need to remember that just because we were the first ones to the dance doesn’t mean we can rest on our laurels forever,” said Andy Mulkerin, managing partner at Nicobar Group, a Shanghai nuclear consultancy. “It’s a global market and you’ve got to be hungry in order to be successful.”
Westinghouse, which is constructing eight AP1000 units world-wide, said it has made significant progress “resolving first-of-a-kind issues,” and the company had “increased confidence toward realizing the timely completion of these projects.” Units under construction in the U.S. have also faced delays and rising costs.
China has used the heft of its big market to secure technology transfers and gradually localize production. Xinhua/Zuma Press
China makes up a huge portion of global nuclear growth as the appetite for large nuclear projects wanes, not only because of the Fukushima disaster’s impact but also because of an abundance of cheap natural gas coming from new drilling technologies.
Out of 71 reactors being built globally, China is currently constructing 26, according to the International Atomic Energy Agency. Another 180 reactors are planned or proposed in China, according to the World Nuclear Association.
China’s technical advances have been on display in recent months. The state company involved in the AP1000 rollout said in September it won preliminary safety approval from China regulators for its own reactor design, the CAP1400, based on Westinghouse’s AP1000.
By the time State Nuclear Power Technology builds its first CAP1400, 80% of the components are expected to be locally made, up from an average of about 55% in the first four AP1000s, according to the company. Many companies eager to enter China’s nuclear market have signed technology-transfer agreements with Chinese state firms—to avoid the risk of getting shut out of the market entirely.
China First Heavy Industries Co. , a technology maker also under China’s central government, is among the firms that are getting business previously held by foreign companies. In August, First Heavy delivered its first domestically produced reactor pressure vessel for an AP1000 reactor. Earlier AP1000 reactor pressure vessels had been supplied by South Korea’s Doosan Heavy Industries & Construction Co. , according to State Nuclear Power Technology. Doosan declined to comment.
Still, despite the challenges, opportunities remain for international providers, said Rosemary Yeremian, president of Strategic Insights Inc., a Toronto-based consultancy. China is new to the global nuclear stage, and partnerships bring quality and other assurances, she said.
As work crews began construction in Zhejiang after the 2007 deal with Westinghouse, Chinese state companies and research institutes got to work dissecting the AP1000. U.S. supply-chain kinks also soon emerged.
Curtiss-Wright positioned itself for success off the AP1000 deal. It valued a contract to supply reactor coolant pumps for the China reactors, coupled with a technology-transfer agreement with State Nuclear Power Technology, at nearly $300 million.
After testing in 2012, Curtiss-Wright shipped the pumps for installation at the first AP1000 in Zhejiang. However, subsequent testing revealed flawed welding, according to a U.S. Nuclear Regulatory Commission filing. Curtiss-Wright blamed its own supplier for the defect.
The flawed pumps were returned to the U.S. for fixes. According to a Securities and Exchange Commission filing by Curtiss-Wright, “disassembly, inspections, and preparation for shipment costs” related to the pumps cost it $23.7 million. Westinghouse wants about $25 million in damages for the delays, according to Curtiss-Wright. Westinghouse declined to comment on “litigation matters or commercial discussions.”
In a written statement, Curtiss-Wright said it “continues to work with our partners in China to negotiate a new follow-on contract.”
Meanwhile, SPX, the U.S. company selected to supply squib valves—a key safety technology—for China’s AP1000s, as part of an agreement valued at more than $100 million, soon became dogged by questions over the valve’s manufacturing. After a February 2012 facility inspection, the NRC said SPX hadn’t properly implemented its quality-assurance program. Back in Zhejiang, concerns over the part forced reordering of more than 200 squib-valve component pieces, according to authorities in Zhejiang.
The province cited squib-valve concerns and problems at Curtiss-Wright as reasons for delays in completion of the first AP1000, which isn’t yet online. As a result, the provincial government said it had been forced to import electricity from other provinces.
SPX didn’t comment directly on delays related to the squib valve, but said the parts it supplied Westinghouse satisfied “demanding quality requirements and technical specifications.”
—Yang Jie contributed to this article.
Foreign Suppliers May Get Left Out; Westinghouse Hands Over Plans
Out of 71 nuclear reactors being built globally, China is constructing 26. The Hongyanhe power station was one of the first to come online in China after the Fukushima disaster. Zuma Press
By Brian Spegele
Dec. 15, 2014 1:49 p.m. ET
BEIJING—When a unit of North Carolina’s Curtiss-Wright Corp. won a roughly $300 million deal in 2007 to supply components for new reactors in China, industry officials trumpeted China’s nuclear boom as good for U.S. business.
Today, Chinese companies are competing for that business—and foreign companies risk getting left out. Meanwhile, Curtiss-Wright’s contract is caught up in a legal dispute, while Chinese authorities blame the company in part for the delay of a landmark nuclear project.
U.S. and other foreign companies are now struggling to keep their hold in China, the industry’s biggest growth market and a rare bright spot more than three years after the Fukushima disaster in Japan put many of the world’s nuclear projects on hold. Yet China is increasingly turning to local companies to build crucial parts for multibillion-dollar nuclear projects, a result of Chinese industrial nationalism and frustration over U.S. supplier problems.
With the global nuclear industry focused on China, the Chinese government has used the heft of its huge market to secure transfers of key technology and gradually localize production. In the process, China is achieving a political aim to source sensitive manufacturing at home and satisfying a practical need to avoid complications posed by faraway suppliers.
One of those supplier issues has surfaced in eastern China’s Zhejiang province, where Pennsylvania’s Westinghouse Electric Co. is building the first of four of its most advanced, commercially available reactor, the AP1000, in China. Local authorities blame two-year delays in part on quality problems related to Curtiss-Wright. In a written statement, Curtiss-Wright said it has “refined and improved our design processes” as a result.
“This sort of thing has damaged U.S. companies’ reputations here,” said Li Ning, a nuclear-industry expert at China’s Xiamen University. “Chinese companies are really growing and basically squeezing out the international suppliers.”
In one case, a specialty part produced by SPX Corp. of Charlotte, N.C., for early AP1000 projects will be supplied by a Chinese state machinery company in future projects, according to State Nuclear Power Technology Corp., a company under China’s central government that is leading the AP1000 rollout. Of the four AP1000 reactors Westinghouse is building in China, the final one will have as many as nine major components supplied by Chinese companies that initially were supplied by foreign firms in the first unit, SNPTC says.
The turnabout illustrates how China is moving swiftly to build a nuclear industry. Already, Westinghouse has provided details of the AP1000 as part of a technology-sharing deal. China plans to use that to build its own reactors that experts say it could sell abroad.
“Folks in the U.S. need to remember that just because we were the first ones to the dance doesn’t mean we can rest on our laurels forever,” said Andy Mulkerin, managing partner at Nicobar Group, a Shanghai nuclear consultancy. “It’s a global market and you’ve got to be hungry in order to be successful.”
Westinghouse, which is constructing eight AP1000 units world-wide, said it has made significant progress “resolving first-of-a-kind issues,” and the company had “increased confidence toward realizing the timely completion of these projects.” Units under construction in the U.S. have also faced delays and rising costs.
China has used the heft of its big market to secure technology transfers and gradually localize production. Xinhua/Zuma Press
China makes up a huge portion of global nuclear growth as the appetite for large nuclear projects wanes, not only because of the Fukushima disaster’s impact but also because of an abundance of cheap natural gas coming from new drilling technologies.
Out of 71 reactors being built globally, China is currently constructing 26, according to the International Atomic Energy Agency. Another 180 reactors are planned or proposed in China, according to the World Nuclear Association.
China’s technical advances have been on display in recent months. The state company involved in the AP1000 rollout said in September it won preliminary safety approval from China regulators for its own reactor design, the CAP1400, based on Westinghouse’s AP1000.
By the time State Nuclear Power Technology builds its first CAP1400, 80% of the components are expected to be locally made, up from an average of about 55% in the first four AP1000s, according to the company. Many companies eager to enter China’s nuclear market have signed technology-transfer agreements with Chinese state firms—to avoid the risk of getting shut out of the market entirely.
China First Heavy Industries Co. , a technology maker also under China’s central government, is among the firms that are getting business previously held by foreign companies. In August, First Heavy delivered its first domestically produced reactor pressure vessel for an AP1000 reactor. Earlier AP1000 reactor pressure vessels had been supplied by South Korea’s Doosan Heavy Industries & Construction Co. , according to State Nuclear Power Technology. Doosan declined to comment.
Still, despite the challenges, opportunities remain for international providers, said Rosemary Yeremian, president of Strategic Insights Inc., a Toronto-based consultancy. China is new to the global nuclear stage, and partnerships bring quality and other assurances, she said.
As work crews began construction in Zhejiang after the 2007 deal with Westinghouse, Chinese state companies and research institutes got to work dissecting the AP1000. U.S. supply-chain kinks also soon emerged.
Curtiss-Wright positioned itself for success off the AP1000 deal. It valued a contract to supply reactor coolant pumps for the China reactors, coupled with a technology-transfer agreement with State Nuclear Power Technology, at nearly $300 million.
After testing in 2012, Curtiss-Wright shipped the pumps for installation at the first AP1000 in Zhejiang. However, subsequent testing revealed flawed welding, according to a U.S. Nuclear Regulatory Commission filing. Curtiss-Wright blamed its own supplier for the defect.
The flawed pumps were returned to the U.S. for fixes. According to a Securities and Exchange Commission filing by Curtiss-Wright, “disassembly, inspections, and preparation for shipment costs” related to the pumps cost it $23.7 million. Westinghouse wants about $25 million in damages for the delays, according to Curtiss-Wright. Westinghouse declined to comment on “litigation matters or commercial discussions.”
In a written statement, Curtiss-Wright said it “continues to work with our partners in China to negotiate a new follow-on contract.”
Meanwhile, SPX, the U.S. company selected to supply squib valves—a key safety technology—for China’s AP1000s, as part of an agreement valued at more than $100 million, soon became dogged by questions over the valve’s manufacturing. After a February 2012 facility inspection, the NRC said SPX hadn’t properly implemented its quality-assurance program. Back in Zhejiang, concerns over the part forced reordering of more than 200 squib-valve component pieces, according to authorities in Zhejiang.
The province cited squib-valve concerns and problems at Curtiss-Wright as reasons for delays in completion of the first AP1000, which isn’t yet online. As a result, the provincial government said it had been forced to import electricity from other provinces.
SPX didn’t comment directly on delays related to the squib valve, but said the parts it supplied Westinghouse satisfied “demanding quality requirements and technical specifications.”
—Yang Jie contributed to this article.
