Power Transformer Market Review
2014 is the year of the Horse according to the Lunar Calendar, and I think it is very symbolic for the transformer market right now....
byMatti Stoor
2014 is the year of the Horse according to the Lunar Calendar, and I think it is very symbolic for the transformer market right now. We can see quick, dynamic movements where the market conditions change rapidly and players reposition themselves quicker than what we have seen in the past.
We can see that the “Management Center of Gravity” is moving, and while Europe has been much of the management centre from manufacturing capacity and capabilities perspectives, we can now expect to have more of management balance between Europe, North America and Asia driven by M&A (Mergers and Acquisitions) and capital expenditure (CAPEX) activities.
As this article is written for the audience that has both knowledge and interest in the transformer market and technologies, I will not spell out all the details but leave things open for your own analysis. Out of respect towards the integrity of players in the market, I will not mention companies or individuals.
The transformer market is becoming truly global and we can see that more players in the market are heading in the global direction as well. This is natural as the competition is strong and few markets can sustainably support a transformer manufacturer for its national purpose. In the early days, transformer manufacturing was considered to be of national interest, but those days are long gone. After the financial crisis, we see that when the financial strength is recovering, it is doing so unevenly. As a result, the market is attracting strong M&A activities that will define the transformer market for years to come.
Given that the competitiveness of the power transformer market is high, it is important to keep a close watch on market prices and trends in order to be able to manage the risk portfolio in an optimal way. The profit pool is tight looking at the majority of power transformer product lines and therefore any risky tendering behavior may have negative consequences as projects are delivered. Nothing new, but we have seen proof of eroding profits, reflected in financial reporting lately. There will, however, always be a drive to capture specific markets, or niche segments, also going forward. A classic way to predict these market battlefields is by looking at CAGR (Compound Annual Growth Rate) data.
One addition during the recent years is that the globalisation is also driven by the free flow of information on the Internet, which basically enables everybody to access the information in real time. With this, strategies, tactics, organisational structures and processes have to be revisited more frequently. This trend is expected to continue and most likely intensify. As an addition to the flow of information, we now have the Transformers Magazine that provides focused news to all of us that are interested in the transformer market and technology development. Much of the information that I have gathered here is available in the Transformers Magazine in some form. By connecting the dots of information, we can all stay up-to-date with the events.
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