The first three months of 2017 have brought several surprises that can possibly impact the global transformer industry. These article series will examine the possible impacts that these events could have on the global transformer industry. Only time will tell which if any of these events will come to pass.
January 2017 saw the inauguration of a new president in the United States and a major shift in how the U.S. will look at the world as stated by President Trump in his inaugural address, ‘Buy American & American Made’ being a prime focus. ABB announcing the close of a plant in New Zealand. The British Parliament’s vote to confirm BREXIT. And finally the commissioning of a new GOES production line in Brazil. These are just a few of the events that we examine.
Part I of this report will concentrate on events that can possibly impact global transformer manufacturers. Part II will focus on the possible impacts to the North American transformer industry.
Let’s start with recent BREXIT vote in the United Kingdom. We now know that the UK Parliament will activate Rule 50 on March 29th. In response the EU Commission has stated that terms of the departure will be such that no other country will want to leave the EU.
What will BREXIT do to the transformer industry? Will the UK maintain the import duties on grain oriented electrical steel (GOES)? What about efficiency standards?
Duties on GOES crossing the Channel?
At this point UK does have a mill producing grain oriented electrical steel (GOES), the CORUS Division of Tata British steel. It is possible that with BREXIT that the EU will look at this mill in the same light that they have with mills in Japan, China, South Korea, Russia and the United States. In that case there would be duties on GOES crossing the Channel.
Which brings us to the Tata British Steel / ThyssenKrupp joint venture. Currently Tata British Steel is in negations with ThyssenKrupp to merge Tata’s specialty steel division. Will ThyssenKrupp want to have production facilities across the Channel in a non-EU country with the possibility of import duties, or will they want to move that capacity into their plants in France and Germany?
Experts stated in 2016 that the UK, on its own, could not meet the EU 2020 Efficiency Standards. Not being a member of the EU, will they decide to adhere to the 2020 Efficiency Standard or will they decide to adopt a less strict standard. If the UK adopts a less strict standard will UK transformer companies be forced to produce a line of transformers for export to the EU and a separate design of the UK.
In recent years we have seen the EU transformer industry out-sourcing their transformer core manufacturing. Much of this has gone to Turkey and the Middle East. Some of the reasoning for this has been the duties imposed by the EU on imported GOES and the continued efforts to reduce costs.
EU transformer manufacturers should be concerned about their supply chain
With the relations between the EU and Turkey becoming more strained, should European transformer manufacturers be concerned about their supply chain, not only, for cores but also magnet wire.
The global GOES supply is undergoing changes also.
In 2016 Allegheny Technologies announced that they were leaving the GOES market, while in China the merger of Baosteel and Wuhan Iron & Steel (WISCO) was announced. This meant that the United States lost one of it’s two GOES producer and 115,000 tons of capacity.
The merger of Baosteel and WISCO could represent a reduction in Chinese GOES capacity since neither company has been operating their GOES facilities at capacity for at least the past year.
Just recently AK Steel has stated that they expect reduced shipments of GOES through the first half of 2017.
To offset these concerns, Aperam has just commissioned a new GOES processing line at their Brazilian operation allowing them to produce HiB. This would be a first for South America.
In India, late 2016 the Russian steel producer NLMK signed a LOI with the Indian government to build a mill in India capable of producing GOES. Maybe they will have better luck than POSCO.
| A Power Transformer release | March 27, 2017 |||