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Message: China's unprecedented Nuclear Reactor build continues
China's nuclear power expansion continues unabated regardless of the recent stock market volatility - while the country evolves away from manufacturing to an economy driven by internal consumption and service industries similar to North America and many European economies. In August, unit 2 of the Fuqing nuclear power plant was connected to the power grid, marking China's 5th new reactor to come online in 2015. The past couple of weeks have also seen fuel loading at Fangchenggang 1and Changjiang 2, making these the 6th and 7th reactors to enter the operational phase this year - plus another three reactors are scheduled to start up by the end of 2015.
Given the country's priority to meet its increasing base-load energy demand through clean sources, China continues to add to its nuclear reactor fleet at an unprecedented pace. The country aims to double its current nuclear power capacity to 58 GigaWatts ("GW") by 2020-2021. This equates to ~30 new reactors coming online in the next five years - 24 of which are under construction today. China is securing uranium to fuel this exponential reactor build through imports as well as buying direct stakes in mining operations around the world. In 2014, China was the world's largest purchaser of uranium - it imported 55 million pounds or the equivalent to 38% of global uranium production. And the most sought-after deposits are ones with low production costs that can be permitted in a relatively short time-frame - and U3O8 Corp's project in Argentina has the potential to meet these critical criteria.
China's evolution towards a consumer-driven economy supports need for more nuclear energy - As Frank Holmes of US Global Investor Funds pointed out recently, rather than China's economy slowing, it is undergoing a major transformation away from a manufacturing, export-oriented base, towards internal consumption and the service industry as a result of its growing middle class (Figure 1) - as people earn more, they want more consumer items such as phones, TVs, refrigerators and computers.
Average income in China has increased 700% from US$930 per capita in the year 2000 to US$7,400 in 2014 (Figure 2) - and has led to higher internal consumption, which is driving increasing electricity use to power consumer items. This is illustrated by the steady rise in per capita electricity usage from 1,000 kilowatt hours ("kWh") per person in 2000 to 3,500kWh in 2012 - an increase of 350% (Figure 3). Per capita income and electricity usage in China are still way below typical levels in the West, although the gap is closing with China forecast to be using 5,500kWh per capita in 2030 - roughly the same as the UK's energy usage today.
Figure 2 - China's Per Capita Gross National Income Compared with Other Major Economies
Figure 3 - China's Electricity Consumption Compared with Other Major Economies
China set to be world's largest generator of nuclear energy by 2026 - China is set to overtake the USA as the world's largest generator of nuclear energy in 2026 (Figure 4). And China's dramatic growth in nuclear energy is driving increasing imports of uranium with Chinese utilities also buying direct stakes in uranium miners - therefore, much of its uranium purchases are not being reflected in the spot and long-term markets (Figure 5).
Figure 4 - China's Actual & Planned Nuclear Energy Output (GW)
Sources: World Bank, WNN, World Nuclear Association, The Guardian, Raymond James, Ux Consulting, Toll Cross, Cantor Fitzgerald
September 7, 2015 - Fuel loading completed at Chinese unit
August 27, 2015 - Fuel loading begins at first Changjiang unit
August 6, 2015 - New Chinese unit connected to the grid
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