Overcapacity, transformer market competition

At present, there are many transformer manufacturers in China. There are nearly 30 manufacturers of transformers with more than 500kV, about 50 companies with 220kV and above, and about 130 manufacturers with 110kV and below in the statistical scope.

Overcapacity is serious. In the past three years, the annual demand for transformers in China is around 1.3 billion kVA. China's transformer industry has a production capacity of about 3 billion kVA, of which Shen, West, and Baosan Group have a capacity of about 500 million kVA. In the past few years, China’s power construction has been developing rapidly, and the demand for transformers has increased rapidly. As a result, a considerable number of domestic transformer enterprises have rapidly expanded their production capacity, and even the production capacity of individual enterprises has doubled. Since 2009, the national power construction has slowed down, and the demand for domestic transformers has decreased. In particular, State Grid Corporation and South China Net Company purchased transformers through centralized tendering, which resulted in unprecedented fierce competition among enterprises.

In addition, due to the fierce competition in the domestic market, the bid price is lower than the cost price, leading some companies to start overseas routes, export products, and build factories abroad. In addition, many companies have begun to develop new, energy-saving, environmentally friendly, intelligent products. However, the general economic benefits of domestic transformer companies have been significantly reduced, and many companies are at the edge of losses or losses. A large number of distribution transformer enterprises have even experienced the situation of sacrificing product quality at the expense of malicious competition (in the third quarter, the profit margin dropped by 46% year-on-year).

In addition, the quality of transformer products has decreased and the accident rate has increased. The qualified rate of distribution transformers in the country is only 70%. The accident rate of transformers on the Internet is on the rise. There have been many accidental transformers in the last five years and the safety of the power grids has been threatened.

Several kinds of unfavorable phenomena affecting product quality: aluminum substitute copper, contract fraud, aluminum wire can be used for re-use of secondary coils of transformer coils, magnetic performance, surface insulation, loss, excessive noise, and short transformer capacity.

This series of problems may lead to instability in the price of transformers.