Global Transformer Shortage Spreads; Domestic Firms Prioritize Expansion And Accelerate Overseas Market Capture

“The Market Is Undersupplied, And Our Workers Have Been Finishing At Nine Or Ten O’Clock At Night For Several Months,” Said Zhang Xiaojin, Chairman Of Jiangsu Huachen Transformer Co., Ltd. (Jiangsu Huachen, 603097.SH), In An Interview With The Paper. “Next Year Will Certainly Be Another Year Of Explosive Orders.”

Computing Power Ultimately Depends On Electricity, And Electricity Ultimately Depends On Transformers. For Over A Year, An Unexpected Global Transformer Shortage Has Persisted Without Cooling. “Previously, Clients Would Typically Select Their Primary Supplier For The Coming Year In December. Now They Lock In Strategic Supply Chain Partnerships At Least Three Months Earlier,” Zhang Noted.

Soaring Power Needs From AI Data Centers, Expanding Renewable Grid Connections, And A Surge In Energy Storage Demand Have Together Driven A Buying Wave In Transformers. “Compared With Traditional Thermal And Hydropower, Photovoltaics And Wind Require More Transformers. Because Green Power Such As Wind Travels Long Distances, It Must Be Stepped Up Multiple Times Before Grid Connection, Which Further Increases Transformer Requirements,” Zhang Explained. In Recent Years, Domestic New Energy Installations Have Sustained Double‑Digit Annual Growth, And By End‑2024, China’s Cumulative New‑Type Energy Storage Capacity Was 130% Higher Than At End‑2023, Leading The Global Market.

“However, Overall Industry Capacity Has Not Risen Nearly As Fast,” He Said. Transformer Manufacturing Requires Deep Technical Accumulation, And Sector Barriers Limit Rapid Output Scaling. Moreover, As Single‑Unit Capacity In New Energy And Storage Continues To Expand, Without New Plant Investment And Equipment Upgrades, Manufacturers Will Struggle To Absorb This Wave Of Exceptional Demand.

To Seize The Opportunity And Relieve Bottlenecks, Jiangsu Huachen Issued RMB 460 Million In Convertible Bonds In July To Fund A Smart Manufacturing Base For New Energy Power Equipment (Phase I) And A Digital Factory For New Energy Power Equipment. The Phase I Base Has Recently Begun Operations. The Aggressive Expansion Responds To Capacity Constraints That Were Limiting The Company’s Ability To Undertake And Supply Incremental Business. After Commissioning, Huachen’s Capacity Doubled, And Product Capability Was Elevated.

The Supply‑Demand Mismatch Has Extended Global Delivery Cycles. “For China‑Made Transformers Delivered Overseas, Lead Times Are Around One And A Half To Two Years. Overseas Capacity Takes Even Longer. In The Tightest Global Cases, Delivery May Require Two To Three Years,” Said Liao Qihua, Head Of Energy Transition And New Energy Industry Research For Greater China At UBS Investment Bank, Speaking To The Paper. “China’s Share Of The Global Transformer Market Is Not Large, But Exports Are Climbing Rapidly. Customs Data Show That In The First Ten Months Of This Year, Export Value Grew About 40% Year‑On‑Year. And This Comes After Nearly Two Years Of Sector Strength, With No Sign Of Slowing.”

UBS Projects The Transformer Market Will Remain In A High‑Prosperity Phase Through 2026. “From Both Demand And Capacity Expansion Perspectives, Prosperity Can Hold Next Year; For 2027, It Will Depend On The Realization Of Global AI Investment, Which Currently Looks Optimistic,” Liao Said.

With Products In Short Supply And The A‑Share Power Equipment Segment Strengthening, Transformers Have Stood Out. From October 24 To November 10, The Transformer Concept Index Rose 21.84%, Versus Gains Of 10.57% For DC Transmission, 8.1% For Power IoT, 7.6% For UHV, And 6.01% For Energy Storage.

A Signal Worth Noting: Hitachi Energy, The World’s Largest Transformer Maker And A Key Transmission And Distribution Technology Supplier, Recently Raised Its Market Growth Outlook, Extending The Global Grid Business Growth Cycle From 2030 To 2035.

Confronting An Unprecedented Super Cycle In Power, Huachen Is Advancing Plans For Further Expansion. Zhang Told The Paper That Data‑Center Transformer Demand Is Expected To Break Out In The Second Half Of Next Year. “The Topic Is Hot, But Few New Data Centers Have Actually Been Completed; Implementation Takes Time.” He Also Anticipates A Concentrated Release Of Demand For Box‑Type Substations Serving Conventional Charging Stations And Integrated PV‑Storage‑Charging Sites. “Over The Next Five Years, Existing Industry Capacity Will Not Meet Demand. Box Transformers For Wind, Solar, Storage, And Charging Piles, Plus 110kV And 220kV Distribution Products For Step‑Up Stations, Should See At Least Double‑Digit Annual Growth.”

More Pressing Than Domestic Expansion Is Using Overseas Capacity To Unlock Additional Foreign Orders. Zhang Shared His Upcoming Itinerary, Including Visits To Spain And Romania To Evaluate And Negotiate Local Factory Projects.

Despite Higher Construction Costs Abroad, Profitability Is A Major Draw. According To The Paper, A Domestic Main Transformer Can Fetch Roughly Four Times The China Price In European And American Markets.

“The Overseas Market Is Still In The Early Stages Of Its Boom. Based On Our Overseas Division’s Recent Two‑Year Analysis, Much Of Europe’s Grid Equipment Has Been Operating For 40 To 50 Years, And The U.S. For 30 To 40 Years, While Design Life Is Around 30 Years. These Assets Are Beyond Service Life, Creating Significant Potential Demand For Grid Upgrades. This Is A Strategic Priority For Huachen’s Overseas Layout,” Zhang Said. Rather Than Simply Selling Products, The Company Plans A “Capital + Technology + Equipment” Export Model To Enable Global Deployment. “We Will Provide Technology And Talent Training, While Partners Handle Market And Management. Our Plan Is To Establish At Least Three Overseas Cooperative Factories Within Three Years, With Europe And The Middle East As Priorities, And Several Partnerships Now Under Discussion.”

Multiple Brokerage Reports Expect Overseas Grid Demand To Remain Strong, Supporting Faster Global Expansion By Chinese Power Equipment Firms.

“Exports Of Domestic Components For Transformers And Gas Turbines Are Worth Watching. Both Categories Have Meaningful Technical Barriers, And Expansion Is Relatively Orderly, Reducing The Risk Of Overseas Price Wars Or Excessive Competition,” Liao Concluded.