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US construction contractors – including for residential, commercial and manufacturing facilities – have reported long delays and unpredictability in obtaining electrical transformers. This is due to inadequate electrical steel supplies amid missing investment decisions in the US to expand production of the material.
Contractors reported “extremely long and unpredictable lead times” for transformers, Kenneth Simonson, chief economist of the Associated General Contractors of America (AGC), told Fastmarkets on Monday April 15.
Contractors waiting for electrical transformers are “quoted a long lead time and then told of a further delay when the delivery date is imminent,” Simonson said.
“I’m not close to electrical equipment manufacturers or their steel suppliers but I’m told that Cleveland-Cliffs, the principal supplier of grain-oriented electrical steel that’s essential for transformers, has been reluctant to expand production, which is producing the long lead times,” he added.
It was not possible to obtain a reply from Cleveland-Cliffs to requests for comment by the time of publication.
Similarly, the Edison Electric Institute (EEI) – an association that represents US electric companies – said in a statement that “electric companies today still are facing unprecedented lead times for transformers.”
The AGC and the EEI – along with groups such as the National Association of Home Builders, the American Public Power Association and Leading Builders of America – wrote to the Senate and House in November 2022 to ask for $1 billion that year to address the problems with transformer supplies.
Material availability was identified as a leading cause in the delays. The letter included recommendations such as “building manufacturing capacity to support long-term demand and investing in domestic production of grain-oriented electrical steel (GOES), a key transformer component.”
Between 2020 and 2022, average lead times to produce transformers across all segments of the electric industry and voltage classes had increased by 443%, the letter said. Orders that previously took two to four months to fill were at the time “taking on average over a year.”
“Construction and electrification projects are now being deferred or canceled” while delays were making it harder to address housing affordability, the organizations added.
Demand for GOES electrical steel is set to expand greatly over the next decades at a faster pace.
According to the AGC’s most recently released statistics, total US construction spending rose by 11% in February compared with the same month a year earlier. Manufacturing construction gained the most, with a 32% increase.
Private residential construction expanded by 7%, while office construction expanded by 6%, the AGC added.
US Steel announced in October the start of a new electrical steel line in its Big River plant in Osceola, Arkansas, but it makes the non-grain oriented electrical steel (NGOES) that is used in making electrical motors of electric vehicles and hybrids. fastmarkets
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