- Power transformers are a critical component of the power generation and transmission substations.
- The global transformers market experienced a dip of 11.7% while power transformers market experienced a single digit decline accounting for 6% in 2020.
- According to Power Technology Research, the global transformer market will grow by 10% in 2021 driven by growth in the APAC and ME regions.
Power transformers are a critical component of the power generation and transmission substations, operating at significantly high voltages ranging from 33 KV to 400 KV. The global demand for transformers experienced a decline in 2020 accounting to USD 23.3 billion mainly due to the slowdown caused by the Covid-19 pandemic. Of the total global transformers market size, 69% is attributed to power transformers which is further divided into oil immersed and dry type transformers.
The global transformers market experienced a dip of 11.7% as compared to 2019 while the power transformers market only experienced a single digit decline accounting for 6% year on year largely because most of its demand originates from transmission and the renewables sector.
The EMEA region accounted for 24% of the global transformers market which is further split into Europe (13%) and MEA (11%). The European power transformer market accounted for over USD 2.08 billion in revenue while the MEA power transformer market reached USD 1.76 billion in 2020 driven by ambitious infrastructure projects in the middle east and electrification projects in Africa.
The Americas account for 27% of the global transformer market in terms of revenue with North America accounting for almost 20%. The power transformers market of North America in terms of revenue accounts for USD 3.36 billion in 2020, mostly driven by replacements of aging grid infrastructure.
The APAC region accounted for the largest portion of the global transformer market with a 49% (USD 11.35 billion) share in terms of revenue in 2020. The power and distribution transformer market in China decreased to USD 2.79 billion not only due to Covid-19 but also due to the completion of large rural electrification projects.
As far as supply chain is concerned, because of Covid-19, lead times of power transformers increased by 3 to 4 months due to shortage of freight services (1 to 2 months) and manufacturing delays (1 to 2 months). Furthermore, a 1% dip in the electricity demand was observed globally where demand in Europe decreased by 3.5% mainly due to lockdown measures taken in 2020 to curtail the spread of Covid-19. As per IEA’s global energy review, the demand for renewables remained the success story of the Covid-19 era as it increased 3% in 2020 and is expected to increase across all key sectors including power, heating, industry and transportation in 2021.
Expected Rebound in 2021
The APAC region will continue to have the largest market share in the global power transformers market (although reduced from 49% in 2020) accounting for USD 8.1 billion. APAC’s power transformer market share will be followed by North America (21.5%), Europe (14%), Middle East and Africa (10.5%) and South America (7%).
As opposed to the negative growth observed last year, the global power transformer’s market is expected to rebound in 2021 and grow at 8% while accounting for a total of USD 17.28 billion in revenue. APAC’s power transformers market is expected to grow at a rate of 8.1 in 2021 as opposed to the negative growth of 5.4% seen in 2020. North America’s market is expected to grow at 10.11%, Europe at 15.38%, Middle East and Africa at 2.2%, and South America at 25%.
Fig 1: Region wise shares of the power transformers market in 2021.
Source: Power Technology Research
Major Drivers of Market Rebound
Investments in the T&D and generation segment followed by developments in the industries is expected to be the major drivers of market rebound of global power transformers market.
T&D: Investments and Trends
Investments in the global T&D infrastructure have been experiencing a decline between 2017 and 2020 where a negative growth of 4% was observed. However, a positive growth of 10% is expected in 2021 accounting for USD 285.4 billion in total (USD 187 billion in distribution and billion in transmission) which will drive the rebound of the power transformers market globally.
Fig 2: Global investments in the T&D sector in 2021.
Source: World Energy Investment (IEA)
Generation: Investments & Trends
Investments in fossil fuel generation which have been decreasing since 2016 have experienced a negative growth of 13% in 2020 but are expected to grow at 5% in 2021. However, there is a continued growth trend in investments in the renewable sector accounting for 7% year on year growth even in 2020, expected to grow by 2% in 2021 as well. Other than the investments in the T&D sector, growth in the investments on the generation side is also going to drive the growth of the power transformers market globally.
Industry: O&G, Steel, Chemicals, and Automotive
Developments in the oil and gas, steel, chemicals and automotive industries is expected to drive the market rebound of the power transformers market. The global chemicals market is expected to grow from USD 3340.32 billion in 2020 to USD 3728.43 billion in 2021 at a compounded annual growth rate (CAGR) of 11.6%. On April 15, the World Steel Association forecasted that global steel demand will climb 5.8% in 2021 to reach 1.874 billion metric tons and that demand will further grow by 2.7% in 2022 to reach 1.925 billion metric tons. In 2021, a rebound in the global light vehicle market of approximately 15% to USD 85 million is expected as per one auto analyst. Looking ahead, 2021 oil demand is expected to recover strongly but remain lower than it was at pre–COVID-19 levels. The IEA now sees global oil demand rising by 5.3 million barrels per day (bpd) on average to 96.2 million bpd this year, and by a further 3.2 million bpd in 2022.
According to Power Technology Research, the global transformer market will grow by 10% in 2021 driven by growth in the APAC and ME regions. China managed to control the spread of Covid-19 and was one of the few economies that posted a positive growth in 2020. Dynamic growth for the transformers market in China is expected to continue through 2021, further pushed by exports, domestic demand, and government funded infrastructure projects. India’s transformer market is expected to compensate for the decline in 2020 but uncertainties still hover over India’s market which are associated with the evolution of Covid-19 infectious strains and the roll out of vaccines in the country. The transformer market in the US is projected to reach pre-pandemic levels due to ‘the Biden stimulus’ and a successful vaccination program. Similarly, major European transformer markets are also expected to reach pre-pandemic levels as their utility and generation sectors ramp up investment to compensate for the declines in 2020.
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