Image

The Nuclear Question

Aug. 31, 2010
Robert Brooks Editor More than a year ago, it came to my attention that there is or will be a shortage in forging capacity for components for nuclear-power generating equipment. As I wondered why an opportunity was being ...

Robert Brooks
Editor


More than a year ago, it came to my attention that there is or will be a shortage in forging capacity for components for nuclear-power generating equipment. As I wondered why an opportunity was being overlooked, an executive with one domestic forger put it to me plainly: it’s an expensive investment for a one-time contract.

In other words, he indicated, there may have been a change in the public’s tolerance for nuclear power, creating demand for new and upgraded reactor facilities; there may be changes in the regulatory atmosphere that will improve the prospects for such projects; and there may already be a healthy global demand for new nuclear power projects; but none of that is a green light for forgers who don’t have the capability to produce large-scale forgings to invest in expensive production equipment that would allow them to enter the market.

Meanwhile, the world’s sole producer of such forgings, Japan Steel Works Ltd., is confident it can meet the demand — possibly indicating the demand is less than portrayed. A scattering of other proposals may arrive at viability, but even that is uncertain. In an uncertain world, even plausible risks may be too much to bear.

The travails of Sheffield Forgemasters International Ltd., to position itself as JSW’s competitor for some of the very large components are revealing. The English manufacturer already produces some parts for nuclear reactors, so it has the expertise and, notably, the accreditations it needs to operate in that market sector. Sheffield’s project had some financial backing from Westinghouse, a builder of nuclear reactors. And, Sheffield had the promise of a $119-million, U.K. government loan to install a new 15,000-metric ton press … until it didn’t have it, because the promise of the loan was withdrawn following a change in the U.K. government, reflecting a fundamental change in attitudes and policies about public debt obligations.

This may be only one project, but it’s a profound change. The withdrawn promise of the loan tells us that some of the standard ways of coordinating industrial projects in the past (government loan guarantees, tax credits) may no longer viable. Worse, it doesn’t leave us with any direction about how those deals might be done in the future.

Sheffield Forgemasters may be able to obtain private capital for the project: the proposal is sound, the demand is recognizable, and the cost seems to be within the parameters of industrial capital programs.

But, if it cannot locate private capital for this deal, or if it is unwilling to accept the terms of that equity investment (control of the company seems to be what the management was holding on to, and thus their reason for seeking a government loan in the first place), then Sheffield Forgemasters — or any manufacturer — is going to have to adjust its long-term strategies.

This is why the question of forging components for nuclear power projects will continue to be a puzzle. Like any proposal that a manufacturer studies, investing in that capability presents a risk. In this case, it’s a risk greater than it can or will assume on its own. For the past several decades, it was frequently possible to get government bodies to share the risk — for example, in the cost of investing in the forging capacity to produce critical military aircraft components.

But, for nuclear power projects, regulators and consumers made forging components too risky, so very few investments have been made. Now, the regulators and the consumers seem persuadable, but the definition of “risk” has changed. Taking on such an investment raises every uncertainty in the world of manufacturing: industrial policies, environmental policies, energy policies; government authority, corporate autonomy; and, of course, financial viability. It’s not that generating nuclear power is too risky, but coordinating the means to supply and serve the power producers is.

That nuclear power now seems to be a viable energy alternative resolves an old question, from another time. Today, as manufacturers look into the future, they see more risk, not less.

Related Articles

Sheffield Forgemasters Wins Civil Nuclear Contracts

About the Author

Robert Brooks | Editor/Content Director - Endeavor Business Media

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others.

Currently, he specializes in subjects related to metal component and product design, development, and manufacturing—including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)