Having been previously ranked on Forbes and Business Week, Ceradyne Inc. is a worldwide leader in the development and production of advanced technical ceramics creating solutions for defense to medical to nuclear power industries. 

In the nuclear space, they are the largest producers of Boron.  According to their 2010 annual report, the isotope separation towers in Oklahoma, US, enables Ceradyne to produce well in excess of 85% of the world’s required B-10.

Dynabond Powertech had a chance to sit down with Mr. Joel Moskowitz and Mr. Dennis Manning to talk about Ceradyne, boron products and the outlook of the company in China's nuclear industry. Joel is the CEO, chairman of the Board, President and one of the founders of Ceradyne. Mr. Dennis Manning is the General Manager of Boron Products.

Mr. Joel Moskowitz at Enriched Boron International Seminar

Mr. Dennis Manning at Enriched Boron International Seminar

Dynabond Powertech: Tell us a bit about yourself (Mr. Joel Moskowitz), the company, and what are your takes on the current nuclear economical environment in China?

Mr. Joel Moskowitz: I graduated in 1961 from Alfred University, a school that is dedicated to advance ceramics. After I graduated, I went into the army and what is interesting is that I was a lieutenant in the US missile command and worked in technical ceramics for missiles. [After the army], I moved to California and got a MBA from the University of Southern California.

In 1967, I and a group of people started Ceradyne as a very small research company focused on advance technical ceramics. The company has grown from very humble beginnings and is now a major leader in 2011.  The company is projected to make 570M to 600M USD in revenues which is almost 50% growth in comparison to last year.

The company is a very strong company and is still technology base but now has become very global in these advance new materials of which one of the key elements is Boron.  It has the capability of absorbing thermal neutrons which means that it acts as a safety in reactor design.  It can [also] modify the acidity of the cooling water so it becomes less corrosive at the same time adding the safety factor.  We are the largest producer of this element in the world.  Not necessary just for nuclear but for other [sectors].

The company has about 2,600 employees. We have about 1.7 million square feet of manufacturing in the US.  We have a major investment in China, specifically Tianjin.  I consider the whole reason why I came to China on this visit is to demonstrate to the people who are here, as the CEO of the company, that we are completely committed to China.

We think [Enriched Boric Acid] will be a major factor in China and also we believe that this is the place for us to be because China is increasing its requirements for electricity every month, for 20 consecutive months. [China] will need to [invest in various sources of power], not just nuclear.  They are going to need nuclear, solar, wind, hydro electric as well as fossil fuels.  On the other hand, they need clean air. Nuclear in the long run is absolutely clean as there are no carbon emissions.  Although the costs of the original plants are high, the actual cost of generating electricity is the lowest by a major factor.

I think that China is entering the market at exactly the right time. From what I understand from Dennis Manning, Wei Ding (Ceradyne’s Director for Business Development in China Nuclear) and others, [the government] is doing it in a very thoughtful way and I’m not so sure if other countries have done it so well.  They may have done it too early perhaps. As I understand it, all the study shows that the new reactors that China is looking at could easily withstand a tsunami and earthquake, the type that occurred at Fukushima. I know this also having talked to people in the US. 

Dynabond Powertech: When Ceradyne entered the Chinese market, what sort of problems did the company face?

Mr. Joel Moskowitz: We had a very positive experience in China. One of our key people, Lu Ning, I met her in China in 1994, was working in a government agency that represented our company.  We were a smaller company that sold materials not to nuclear, but to other industries.  As a small company that was [our strategy back then].  As the business grew of course, we now have established a significant presence.  We have an office in Beijing.  We have invested 50 million USD in Tianjin.  [The first plant] was established in June 2007. The second plant was [opened] in January 2011 and the third plant [opened] in August 2011. We have found it not so difficult [to establish a company in China]. 

We operated in a manner that wouldn’t be that different than our operations in other countries. One of our strategies is to always use nationals.  For example, our facility in Tianjin is run by a Chinese, Shuhai Wang, who got his PhD at my school, Alfred University.  Lu Ning has now a 17 year relationship with Ceradyne.  We also believe in treating management in China in a very similar [method like in the] US because we want them to feel they are part of the company as far as compensation and possible stock options.  There is no thought process of ‘well this is China’. This is a Ceradyne operation.

Dynabond Powertech: How much investment did the company make regionally in comparison with the investments made globally with Ceradyne?

Mr. Joel Moskowitz: As I mentioned, the big investment was the 50 million USD in Tianjin and the company has a book value of about 750 million USD.  So, that would roughly be about 7% of our investments are in China.  It really is more than that because it is only late in life [since 2007 that we build our facility in Tianjin]. The Tianjin facility is doing very well. China represents somewhere around 10% of the company’s revenues and is growing faster than the [rest of the] company.

Dynabond Powertech: What do you think the future of boric acid is in the Chinese nuclear power industry? Safety is a huge concern, especially post-Fukushima, so what are your views on the trend?

Mr. Joel Moskowitz: We are so enthused about [boric acid] because it is not very easy to make. Dennis’s operation is in Oklahoma and it began construction almost 40 years ago because to separate the isotope B-10 from natural Boron leaving only 11B is very difficult. Because of that we have become a major factor. [The process requires] massive facilities [for the separation process]. We are very enthused about it because we believe whether [China] utilizes their own reactors or Westinghouse or Areva they are all going to require safety factors and EBA is just a natural [choice]. It will absolutely reduce corrosion of the system [for EPR power plants] while at the same time adding in the safety [factor].  And now safety is more important in people’s mind than corrosion but the truth is they are both important.

Mr. Dennis Manning: The primary drive for increased safety is you have more criticality control.  You also have a wider option of operating range from a corrosion resistant standpoint which is also indirectly related to safety. In all reactors, the use of zirconium alloys for fuel cladding is key, regardless of the design, regardless of the year, regardless of the manufacturing. There is an inherent corrosion activity between dissolved lithium and zirconium. So we see benefits for all reactor types that will continue to use zirconium fuel cladding in the fuel. Various alloys have various corrosion rates but all can benefit.

Dynabond Powertech: Back to more general perspective, all new nuclear power plants projects were suspended in China.  How has that affected Ceradyne’s current business?

Mr. Joel Moskowitz: It had no impact right now. That’s truly not an issue and I also believe it is just a temporary situation which was prudent to do and I think as [China] announces their results and findings, I believe [their nuclear power plants] could withstand the Fukushima type catastrophe.

Dynabond Powertech: In thinking towards the future, the government is very aggressive in terms of their localization rate for the [components installed] in the nuclear power plant.  Do you think it’s a threat that someday a [Chinese] company may produce boric acid in China and there is less [demand] for Ceradyne to supply boric acid?

Mr. Joel Moskowitz: First, [the process] is not easy to do. It is not like somebody will simply say ‘well we can do this to have localization’.  If they decided to do that, they will have to duplicate what took us 40 years to do. These are huge facilities because of the nature of the separation process. Second, we are very willing to be corporative to have localization in China.  One of the major reason why we are here and one of the key requirements that Wei Ding is working on, is choosing who we should partner with? What level of cooperation should we have? How should we work with utilities? How should we work with Areva and Westinghouse? All of this is now on the table as we are having meetings for a solid week on this. So, it is very clear we have to have a localized product and exactly how to do it is not so clear but [this] will evolve.

Dynabond Powertech: What would you try to do to ensure the competitive edge of Ceradyne in China?

Mr. Joel Moskowitz: I think we have already established that by the 40 year facility, by various experiences; there are not so many people who know about this little area of B-10 enrichment. Although we cannot say we have a monopoly on that we certainly have some of the best scientist. I also think just because of our capacity, people, technology and facility—this is on a huge plot of land in Oklahoma.

I am always concerned about Intellectual property and the protection of it.  I also believe that if we partner and cooperate with the right people that will help protect it.  Additionally, it tends to be self-protecting because what I explained, it is not so easy to do [end].