Transformer troubles

Supply chain bottlenecks are keeping transformers in short supply.

Trying to get hold of a new transformer these days is no mean feat. Availability has been steadily tightening over the past couple of years to the extent that today there is a recognised shortage of transformers on the world market, including in the Middle East.

A boom in demand is one of the primary reasons behind the supply constraints, as Tim Walker general manager for UAE-based Brush Transformers Gulf explains: "The transformers market is very busy in this region as there is so much infrastructure and building work going on.

The level of increase in the market is pretty drastic in terms of the requirements and it looks as if it is going to continue for the next five years at least. Worldwide, the transformers market is very strong with requirements outstripping capacity.

Average lead times have crept up from 6-9 months to 18-32 months due to the numbers of orders coming in. "For oil-type transformers the market is running at an undercapacity of 10-15% annually," says Rachid Maalouly, production manager for Saudi Electrical Transformers Factory.

"This is due to new developments and infrastructure investment, which all need transformers.

The transformers cycle is very much affected by the real estate cycle. The current investment boom is leading to a shortage in transformers in general, oil-type and dry-type. For dry-type transformers the shortage is even more severe, with up to a 20% shortfall.

Dry-type transformers are used in residential blocks, hospitals, universities, on oil rigs and in other sites where there is a requirement for high safety standards.

"Utilities are also installing more capacity," Maalouly continues. "We are expecting generating capacity to double by 2015. Now the total capacity is around 44 000 MW GCC-wide and by 2015 we are expecting it to reach as much as 89 000 MW.

This huge increase is putting pressure on the production of transformers: it is really straining the industry.

Caught off-guard

Industry players openly admit to having been taken by surprise by the sudden upturn in transformers demand. The change in the market came after almost two decades of stagnation, during which capacity cuts and plant closures were the norm.

"Five years ago there was overcapacity, transformers factories were shutting and then all of a sudden it took off," says Walker.

The explosion of industrialisation in China and to a lesser extent in India, along with rapid development in the Middle East funded by massive budget surpluses, resulting from record high oil prices, are responsible for much of this new consumption.

But elsewhere in the world there is also a huge requirement for transformers from utility providers looking to replace assets that are reaching the end of their service life.

Capacity investments

Naturally, most transformers suppliers are responding to this market revival by increasing their production capacity, but of course this takes time.

"I can't say when supply and demand will balance out again, as building a transformers factory takes time," says Walker. "It took us 12-15 months to build ours. It is not a fast process to bring a factory online. There is no quick fix."

Brush Transformers Gulf began commercial production at its facility in Abu Dhabi towards the end of last year. Previously, Brush Transformers supplied the region from its UK plant.

The company decided to open a unit in the Middle East in joint venture with local firm Al Nasser Industrial Entreprises in order to capitalise on the region's high growth potential and to cut down on shipping and import duty costs.

The factory, which is still in ramp-up phase, is expected to have an annual capacity of 5 000 MVA once it hits its full stride in the second half of this year.

"We are still in the approval stage with the local utilities, getting engineering approvals, commercial approvals and third-party certification," Walker explains.

"As it is a new facility, they want it to go through short-circuit tests, impulse tests, noise level tests - a full range of tests to prove that this facility can make transformers even though it is a proven design that we have been using for many years. This is to prove that this facility can make them to the same standard."