The power transformer market, and its relationship to power construction spending in general, tell a fascinating tale when analyzing MetalMiner’s monthly GOES (grain-oriented electrical steel) MMI®, which nose-dove 16 percent to a value of 221 in December. Compare with last month’s report (including additional analysis) here.
The global power transformer market stood at $10.3 billion in 2013, according to a recent report, and even though emerging economies in Asia and the Middle East drove growth, North America is not seeing as much installation activity. However, with 70% of power transformers in North America being more than 25 years old, the replacement market provides major opportunities for power transformer companies,” according to the release.
As my colleague Taras Berezowsky reported last week, “US power construction spending decreased in October 2013, down 3.7% from last month and more than 15% from one year ago, which coincides with our monthly Renewables MMI® drop. While spending increased dramatically during Q3/Q4 2012 compared to the year’s first half, that trend is certainly not being repeated in 2013.” Furthermore, average GOES import price levels have fallen for the third month in a row while volumes remain steady, somewhat surprising given the recent preliminary findings of the ITC in favor of domestic GOES producers AK Steel and Allegheny Technologies (ATI).
Why AK Steel, ATI are in the Crosshairs
Last month, we suggested that Allegheny Technologies and AK Steel may have killed the golden goose since such a large chunk of the US power transformer industry has operations in Mexico and Canada (two countries not impeded by this anti-dumping filing).
In particular, “Global supply-chain multi-faceted transformer and electrical equipment companies such as ABB, Eaton, Schneider Electric, Prolec GE, and Siemens, among a few others, could easily near-shore production to other NAFTA countries not impacted by this anti-dumping petition.”
What We Know
As of this writing, we have not received any confirmation that any transformer producer has moved production. However, industry insiders tell MetalMiner that AK Steel has begun raising prices on high permeability GOES by 10-20% (H-0 DR, and H-1). Prices for M3-M6 grades appear stable at the moment, but sources tell us buyers expect price increases from AK and ATI in 2014.
The impact of these price increases will disproportionately hit those large power transformer manufacturers that can no longer source from the countries impacted by the anti-dumping case, such as Efacec, Hyundai, Mitsubishi Electric [MEPPI], and Waukesha Electric.
This will by extension impact the overall competitiveness of the US power transformer industry. Moreover, companies such as WEG-Voltran will now have a competitive advantage in bidding on power generation projects in the US.
What This Means for GOES Buyers
Buying organizations that can work with their suppliers to engineer material substitutions may have an opportunity to carve out a competitive niche, but the landscape of the US power transformer industry will likely shift dramatically over the next couple of years.
What Is This Month’s GOES Price?
After rising the previous month, the US grain-oriented electrical steel (GOES) coil price dropped 16.2 percent.
For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.