(Zhen Xiang, Special Correspondent for Global Times) The strain on global supply in the power transformer market has grown increasingly severe over a period of time. The Financial Times of the United Kingdom reported on the 3rd that the power transformer market had long suffered from oversupply, with lead times of six to eight months for regular orders. Over the past two years, however, surging power demand driven by the rapid expansion of data centers has brought a flood of orders from power utilities, pushing delivery lead times up to three to four years.
Transformers play a vital role in voltage conversion, enabling efficient transmission of electricity from power plants to end users. Rystad Energy, a Norwegian consulting firm, forecasts that the global transformer market size will jump sharply from the current USD 48 billion to USD 67 billion by 2030. Analysts at the firm stated plainly that power transformers are the critical grid equipment facing the most acute supply shortages. Constrained by difficulties in ramping up production, the industry is under unprecedented pressure, and tight transformer supply is expected to persist at least until the end of 2026.
According to the Financial Times, transformer manufacturing is a labor-intensive sector requiring specialized winding machines. Procuring and setting up such equipment takes many years, while manufacturers remain cautious about overinvesting.
Andreas Schierenbeck, CEO of Hitachi Energy, a subsidiary of Japan's Hitachi and the world's largest transformer manufacturer, told the Financial Times that transformer producers cannot quickly expand capacity to meet power equipment demand from data centers, and the industry is "overstretched". Hitachi Energy plans to invest USD 6 billion and recruit 15,000 new employees over the next three years to boost production capacity. Schierenbeck argued that the transformer industry will not see overcapacity emerge anytime soon.
A report released by the US National Infrastructure Advisory Council in June this year pointed out that the US power grid is grappling with an unprecedented imbalance between supply and demand for power transformers, which poses a serious threat to the stability and reliability of the grid in the future. A report published earlier this year by the US National Renewable Energy Laboratory indicated that the supply of distribution transformers needs to rise by 160% to 260% compared with 2021 levels by 2050 to satisfy residential, commercial, industrial and transport energy demand across the United States. The US National Infrastructure Advisory Council recommended scaling up domestic production of transformers and related key components as the optimal solution to ease transformer supply shortages.
The Financial Times noted that China's transformer export volumes have soared over the past two years. A research report released earlier this year by Zheshang Securities showed that Chinese transformer manufacturers boast stable raw material supplies, low production costs and strong technical capabilities. Amid the global undersupply of transformers, these enterprises are encountering historic opportunities for overseas expansion. China's transformer exports reached 37.3 billion yuan last year, representing a year-on-year growth rate of 27%. With the global transformer market set to maintain growth, Chinese manufacturers are poised to further lift their share of overseas markets.
Nevertheless, electrical equipment still faces certain barriers in the initial phase of entering overseas markets. A research report by Soochow Securities mentioned that domestic transformer enterprises encounter multiple hurdles when going global, including sales channel development, product certification requirements and tariffs. Even so, overseas markets hold strong appeal and promise broad prospects in the medium to long term.
A research report published by CICC in August held that China is currently the largest source of transformer imports for the European Union. Supported by established track records and brand recognition, Chinese players are well-positioned to further penetrate the European market leveraging technological strengths and cost-performance advantages.