CITIC Securities: Gas Turbine Prosperity Expected to Reach Historic Highs, Domestic Supply Chain Has Greatest Elasticity

Author｜Yue Zhu, Wenmin Qu

In this report, we review the past 30 years of global gas turbine orders, analyze the similarities and differences between this cycle and that of 2000, and believe that although current gas turbine orders are approaching historical highs, there are significant differences in regional concentration, driving factors, the impact of natural gas prices, and delivery capacity.

We think that the demand in this cycle is strongly sustained by the actual growth of AI, and the subsequent gas turbine sector will continue to see order growth, industry chain expansion, and a shift upward in industry chain profit margins amid supply-demand tensions. Due to the relatively low willingness of North American and European upstream supply chains to expand capacity, domestic independent manufacturers of turbines, blades, castings and forgings, HRSGs, and other components are advancing product certification and order intake. The domestic supply chain will fully benefit from this once-in-thirty-years gas turbine cycle.

Currently, gas turbine orders are approaching historical highs, but compared to the peak in 2000, there are notable differences:

1. Significant regional concentration differences: In 2000, US orders accounted for 68%, and in 2025, 44%. The current demand for gas turbines is relatively dispersed, driven by synchronized growth in Asia and the Middle East.

2. Different driving factors: In 2000, some speculative demand was driven by independent power producers (IPPs), leading to an increase in US standby capacity to 27% in 2002. This cycle’s order growth is primarily driven by actual demand, with current standby capacity around 15%, a relatively low level historically.

3. Cyclical fluctuations in natural gas prices: From 2000 to 2006, rapid increases in natural gas prices raised operating costs for gas-fired power plants, causing a sharp drop in orders. After the shale gas revolution in 2006, US natural gas and oil prices decoupled, and geopolitical conflicts had only short-term effects on gas prices.

4. Significant differences in capacity and delivery capabilities: During the last boom, shipment volumes doubled from 50 GW in 1999 to 99 GW in 2001, with proactive capacity expansion measures by industry players. In this cycle, companies are less inclined to expand capacity, but domestic supply chains for components and complete turbines are expected to benefit fully.

We believe that demand in this cycle, driven by AI, is sustainable, and the industry chain will evolve as follows:

1. Orders will continue to rise through 2026, potentially reaching 107 GW, the highest in history, with industry production scheduled through 2030.

2. Urgent need for capacity expansion in the industry chain: Since Q4 2025, leading gas turbine companies have implemented capacity expansion plans. Orders have surged this year, prompting Mitsubishi and Siemens to prepare new capacities.

3. Under supply-demand tensions, the profit center of the industry chain is expected to shift upward, with upstream profit margins increasing in tandem.

Investment recommendations:

1. Overseas blade leaders HWM and PCC are expected to see only 3-5% growth in capital expenditure through 2026, while domestic companies are accelerating the introduction of high-barrier components like blades and castings, which should continue to benefit.

2. Overseas OEMs are planning production through 2030, while domestic turbine manufacturers are rapidly delivering, beginning to take on spillover orders.

I. Review of the global gas turbine cycle and the sustainability of this cycle

Comparison of global gas turbine cycles and differences in 2025

In 2025, global gas turbine orders reached 99.9 GW, a 76% increase year-over-year, approaching the previous high of 107 GW in 2000. Although current orders are near historical highs, there are notable differences from 2000 in regional distribution, driving forces, and sustainability.

We compare the two cycles’ similarities and differences:

1. Significant regional concentration differences: The 2000 upcycle was mainly driven by deregulation in the US power market, leading to the entry of independent power producers (IPPs). Of the 107 GW total orders in 2000, 68% came from the US. In 2025, even with accelerated data center-related orders, US gas turbine orders only account for 44% (44 GW), lower by about 24 percentage points. Meanwhile, demand for coal-to-gas conversions in Asia and energy transition in the Middle East are key drivers of global growth.

2. Different driving factors: Both cycles show improving electricity demand, but in 2000, speculative orders from IPPs, combined with higher grid redundancy, contributed to the cycle. According to the US Energy Information Administration (EIA), from 1990 to 2005, US electricity demand grew at a compound annual rate of 2%. From 2005 to 2020, demand was relatively stable, with an expected CAGR of 1.7% from 2020 to 2026. The main growth drivers are the industrial and commercial sectors, including data centers and manufacturing.

In 2000, deregulation encouraged investors to build power plants without guaranteed buyers, leading to more speculative orders, and standby capacity reached 27% by 2002. In contrast, this cycle’s growth is driven by actual electricity demand, especially from data centers, with current redundancy around 15%.

Policy background: Before 1992, the US power market was dominated by a few vertically integrated utilities. The 1992 Energy Policy Act allowed independent power producers (IPPs) to enter the market, requiring utilities to provide equal access to transmission lines. The 1996 Federal regulations further separated generation from transmission, incentivizing IPPs to build and sell power for profit, exemplified by Enron and California’s deregulation.

3. Cyclical fluctuations in natural gas prices: Post-shale revolution, US natural gas and oil prices have decoupled, with short-term geopolitical conflicts causing temporary price spikes.

In the 1990s, combined-cycle gas turbines became mainstream, aided by low natural gas prices. From 1999 to 2006, prices surged from $2.2 to $3.6 and $5.4 per million British thermal units, increasing operating costs and causing a sharp decline in orders. After the shale gas revolution, US natural gas supply fundamentally changed, with horizontal drilling and hydraulic fracturing enabling large-scale extraction. US natural gas production doubled from about 501 billion cubic meters in 2006 to over 1 trillion cubic meters in 2023, with shale gas accounting for over 75%. This supply glut kept prices low long-term.

Before the shale revolution, US natural gas prices were strongly correlated with oil prices. Post-revolution, oversupply caused prices to decouple, often remaining below oil prices on an energy-equivalent basis. Recent geopolitical events, such as the Russia-Ukraine conflict and Middle East tensions, temporarily boost global gas prices and influence US markets, but the US’s self-sufficiency limits volatility.

4. Capacity and delivery capacity differences: During the last boom, shipments doubled from 50 GW in 1999 to 99 GW in 2001, with proactive capacity expansion by OEMs like GE, which shipped 68 units in Greenville in 1998, doubling by 1999.

In this cycle, overseas turbine OEMs are less inclined to expand capacity, with PCC and HWM slowing their 2026 capital expenditure growth to 3-5%.

II. Domestic supply chain will fully benefit from this cycle’s growth

Based on the above review, we see that demand drivers differ significantly from 2000 and are more sustainable, for the following reasons:

1. The current global market demand for gas turbines is not driven by speculation. AI-driven electricity demand will continue to grow beyond 2026. We expect that starting in 2026, AI will become the core driver of North American power load growth, with demand reaching 19, 32, 49, and 71 GW in 2025, 2026, 2027, and 2028 respectively.

2. Delivery of orders over the next three years will lag behind power demand: North American CSP grid connection is slow, and current grid capacity is far below demand. Data centers are entering the era of self-generation, with gas turbines as the key baseload energy source. Based on current orders, we estimate that North American gas turbine deliveries from 2026 to 2028 will total 60-66 GW, far below the 152 GW of AI power demand in the same period.

3. US natural gas prices have decoupled from oil, and geopolitical frictions may impact short-term supply, but the effect is unlikely to be sustained.

Looking ahead, the following industry chain production and evolution logic is expected:

1. The order growth in 2026 will be driven by ample capacity: historical cycles show that 2025 orders have not yet reached the previous peak of the internet boom. Given the certainty and sustainability of AI demand, we believe global gas turbine orders in 2026 will still have upward momentum, potentially exceeding 100 GW, with industry production scheduled through 2030.

2. Urgent need for capacity expansion in the industry chain: since Q4 2025, leading gas turbine companies have implemented capacity expansion plans. Orders have surged this year, prompting Mitsubishi and Siemens to prepare new capacities. Upstream component demand continues to grow.

3. Under supply-demand tensions, the profit center of the industry chain is expected to shift upward: since 2024, gas turbine prices have increased by 10-20%. The profit margins of OEM new orders are rising, and upstream shortages are expected to boost profits in critical segments.

4. Overseas supply chain expansion remains conservative, while domestic expansion is strong, making domestic manufacturers the biggest winners in this cycle: considering the cyclical volatility of demand, overseas expansion of blades, castings, and forgings is limited. Domestic supply chains are actively expanding and accelerating overseas product certification, which should lead to both volume and profit growth.

In summary, we believe that:

1. Due to lower willingness of European and American upstream supply chains to expand capacity, domestic blade and component companies are advancing product certification and order intake.
2. Domestic independent turbines, integrators, coal-to-gas, and ship-to-gas suppliers have export potential.

On demand: changes in national infrastructure policies, lower grid investment, slower new energy installations, and reduced electricity consumption growth, along with slower progress in grid bidding and ultra-high-voltage construction, have impacted demand.

On supply: rising prices of copper, steel, and other commodities; shortages in power electronic components; and slower domestic localization.

On policy: less support for new power market reforms, slower electricity pricing mechanism reforms, and delays in spot market development.

On international factors: rapid easing of energy crises, falling energy prices, deepening trade barriers.

On market: significant changes in competitive landscape, increased competition leading to lower profitability in power equipment segments, and rising transportation costs.

On technology: slower-than-expected cost reductions and limited improvements in reliability.

Securities research report title: “Gas turbine prosperity expected to reach new highs, domestic supply chain most resilient”

Release date: March 15, 2026

Published by: CITIC Securities Co., Ltd.

Analysts: Yue Zhu SAC No.: S1440521100008 BTM546 Wenmin Qu SAC No.: S1440524050004