Transformers

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> Learn more about Andreas Erdpresser

Andreas Erdpresser is Managing Director of Interconnection in Bratislava. He has extensive industry knowledge and is an expert in market intelligence, industry and product trends, as well as in innovation management. Before his time at Interconnection, Andreas Erdpresser worked at IBM, Kraft Foods (Mondelez) in Product Change Management, and at Management Consulting Partners in implementation consulting for industrial customers. He studied Economics at the JKU (Linz, Austria) and at the University of Western Ontario (Richard Ivey Business School, Ontario, Canada).

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Transformers Industry Is About To Recover

New study released by Interconnection shows that Transformers Industry is on a Positive Path in Europe Top-7

According to the recently published study by Interconnection Consulting, the Transformers market displayed a drop of -1.6% in 2014 in terms of quantity reaching 2.9 Bn Euro. The euro area is continuing its ongoing recovery and for the first time since 2007, all its economies are expected to grow again in 2015.That is why the market quantity is expected to stagnate by – 0,7 in terms of quantity while the value of the market is growing with average growth rate of 5.8% between 2014-2018f. This is explained by European Union Directive, which is focused on reducing transformers’ electrical losses and making more visible indication of performance. This will lead to more expensive raw materials which will increase the price for transformers.

 

United Kingdom Performs the Best

The Transformers market in Europe (Germany, Austria, the UK, France, Benelux, Spain and Italy) has an accumulated market value of 2.915 Million Euros, which corresponds to 63.230 transformers sold in 2014. As the German – one of the biggest, UK’s and Benelux markets went through positive development from 0.8% to 3.0% in terms of quantity, the total market decreased only by 1.6% in terms of quantity. The best performance showed the British market which occupies more than 10% of the transformers market – it grew by 3.0% speaking about quantity. One of the smallest, the Spanish market, have had the worst period among other Europeans. Three main target sections: electricity companies, construction industry, that is still facing negative development in both – residential and non-residential segments, and renovating of old transformers, which was the main driver of the market for a couple of last years did not push the demand for transformers up. So after 5.8% decrease in terms of quantity in 2013 the market declined again in 2014 – by 4.7% in terms of quantity reaching 246.1 Mio Euro.

 

3/5 of All Transformers Are Distribution

European markets are rather similar in their preferences. Distribution transformers occupy the majority in each country in terms of quantity, representing 65.2% of the total European market. This segment is projected to be slightly decreasing till 2018f while the construction sector will improve. The second biggest segment is power transformers which hold 15.6%. Nevertheless, this group is the biggest in terms of value due to the fact that it is presented with the largest and the most expensive transformers. The rest of the market is almost equally split between special (11.4%) and traction (7.8%) transformers.

 

Service Becomes Important

Respectively, a small amount of companies that are present on the European market provide service of transformers. This is simply explained by the fact that installed transformers provide continuous operation for many years without a need of being repaired. But recently this niche, which currently accounts for 7.8%, has become rather demanded and important because transformers that were sold 30-40 years have to be reinstalled or at least repaired and in current economic conditions it is much more efficient to service the old one than to buy a new one. Thus, to stay competitive companies need to have in its portfolio both – sale of new transformers and also service.

 

Local Heroes Become Evident in the Transformers Industry

The transformers market is highly concentrated; Top-10 holds 71.3% of the European market. Multinational companies, such as ABB, Siemens, Schneider Electric, Alstom, are present in every country and holding the positions among the Top-10. But each market has its own “local heroes” that hold rather strong position as they can offer lower prices due to the closer located factories. For example, the Top 10 list of transformers industry in Italy is occupied by domestic manufacturers which are year by year dominating and do not let multinational companies succeed on this market. It is simply explained by the fact that the latter have higher prices for its products which cannot compete with national producers.

 

Price Matters

In the past few years the EU transformers’ manufacturing sector has been losing jobs and internal market share. Price became a very important issue. Most of the companies move their factories from western European countries to eastern in order to reduce high prices, e.g. Schneider Electric moves transformers production to Poland and also builds a new plant in Samara, ABB launches new manufacturing facilities in the Czech Republic, Siemens also opened a plant in Russia. Every year the market sees new companies from neighboring countries such as Croatia, Slovenia and Slovakia. They are being very competitive as can offer good quality products for much lower prices. All in all, it becomes hard to save the position on the market, taking also into consideration that demand is very low and the market is getting oversaturated.

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