Transformer Supply Crisis! Global Shortage Expected to Continue Until 2029

Global power transformers are entering a long cycle where supply cannot keep up with demand. Citibank straightforwardly states the key contradiction in this industry: It’s not short-term demand spikes, but the inability of capacity expansion, delivery, and labor to keep pace with grid upgrades, generation expansion, and the added loads from data centers.

According to Chase Wind Trading Desk, Citibank analyst Pierre Lau wrote in a report, “We are optimistic about the global power transformer industry, expecting supply shortages to persist at least until 2029.” Behind this judgment is a set of supply and demand estimates based on “hard constraints”: even with leading manufacturers expanding capacity, the gap will continue to accumulate over the next three years.

Based on Citibank’s estimates for global high-voltage (>100kV) power transformers, the supply gap in 2025 is about 30% compared to demand; from 2026 to 2028, annual supply will still fall short of annual demand; the cumulative shortage will rise from 708 GVA in 2025 to a peak of about 1,699 GVA in 2028.

Industry results are also more aligned with “price cycles” rather than “volume cycles”: scarcity leads to longer delivery times, rising prices, and order concentration among capable manufacturers. Citibank’s stock selection approach is consistent—prioritizing companies with clearer order and capacity expansion plans for buy ratings, while maintaining a neutral stance on companies with strong fundamentals but valuations significantly above the sector average.

The gap is not just a year or two: the cumulative shortage peaks in 2028.

Citibank breaks down the gap into two levels: the annual gap narrows each year, but the cumulative gap continues to grow until 2028.

• 2025: Global supply about 2,358.5 GVA, demand about 3,066.0 GVA, with an annual shortfall of approximately 707.5 GVA (about 30% of demand).
• 2026-2028: annual shortfalls are approximately 522.2/325.2/143.9 GVA respectively.
• From 2029 onward: annual supply slightly exceeds demand (about 47.2 GVA surplus in 2029), but the cumulative shortage remains unresolved until 2030.

Another detail often overlooked in these estimates is the decreasing concentration among top manufacturers. Citibank expects that, based on capacity, the top ten companies’ market share will decline from 79.4% in 2025 to 72.6% in 2030. Capacity expansion is happening, but the “effective incremental” supply is dispersed, and the pace of realization is uneven.

Capacity expansion cannot solve the shortage: capacity and skilled labor are bottlenecks.

Citibank does not deny the effort to expand capacity. It estimates that global high-voltage transformer capacity will increase by a total of 53% from 2025 to 2028, with annual growth assumptions of +17% in 2026, +15% in 2027, and +13% in 2028; extending to 2030, the cumulative increase is about 95%.

The problem lies in two bottlenecks that are more like “slow variables”:

2. Shortage of skilled workers: Citibank highlights “shortage of skilled labor” as a separate issue, considering it a barrier that causes supply shortages and takes years to alleviate. Expanding production lines does not immediately stabilize deliveries; training cycles eat into the marginal benefits of capacity expansion.
3. Tight supply chain for key materials and components: The report cites industry consulting firms, emphasizing high dependence on imports in the U.S.: Wood Mackenzie estimates that about 80% of U.S. power transformer supply relies on imports (around 50% for distribution transformers). Under this structure, trade and tariffs more directly impact costs and delivery times. The domestic supply of oriented silicon steel (GOES) in the U.S. is highly concentrated (only one supplier, AK Steel), and copper windings could also become a bottleneck; combined with a 50% tariff on copper, the “friction costs” on the supply side are harder to eliminate.

Citibank also points out a realistic capex constraint: building new high-voltage (>220kV) transformer capacity in the U.S. requires about $450 million to $500 million per GVA, according to their survey; Japan, Korea, Europe, and China have relatively lower unit capex. Capacity expansion is not impossible but will be slower and more expensive.

Two demand-side forces: grid and generation, and data centers

Citibank divides demand growth into “traditional needs + new loads.”

First, ongoing investments in grids and generation. The report cites IEA data indicating that in 2024, developed economies and China together account for about 80% of global grid investments; the U.S. about $100 billion, the EU about $60 billion. Citibank also references Bloomberg NEF estimates: under net-zero scenarios, global grid investments will grow at an average of about 12% annually until 2030, reaching a scale of $777 billion.

Second, data centers are elevating electricity demand curves. Citibank cites its US research team’s upward revision of capex assumptions for hyperscale cloud providers: the capex growth rate for several hyperscalers has been raised from 18% (CAGR) to 28% from 2025 to 2030. If such assumptions approach reality, the duration of transformer shortages will not be simply “resolved through capacity expansion.”

In a more order-based breakdown, based on Citibank’s estimates of new orders from Korean transformer manufacturers, U.S. transformer demand is roughly split as follows: 40-45% from grid, 30-35% from power plants, and 20-25% from data centers. This explains why the industry’s sensitivity to AI and data centers is increasing—they are now embedded in the demand structure.

Prices are already trending upward: US costs and PPI are rising

The tight supply and demand imbalance first show up in prices and lead times. The report cites Wood Mackenzie, noting that since 2019, unit costs for different categories of transformers in the U.S. have risen significantly: power generation step-up transformers +45%, power transformers +77%, distribution transformers +78% to +95% (depending on specifications).

Citibank also adds a more “macro” price signal: the PPI for U.S. electric and distribution transformers from FRED was 366.6 in January 2026, up 6.2% year-over-year. They believe the upward price momentum will continue, mainly because shortages are not yet resolved.

Citibank states that shortages drive prices, prices drive profits and valuations. The key variables in this chain are clearly outlined:

• Will data center capex and electricity loads continue to be revised upward? This could be a “demand acceleration” factor, directly prolonging shortages.
• The combined effect of tariffs and import dependence: The U.S. relies heavily on imports, and tariffs not only raise costs but may also extend lead times.
• Capacity expansion is not just a matter of announcement: Building production lines, ramping up operations, training skilled workers—all these make supply elasticity more rigid.

Citibank also explicitly states that the Middle East conflict has limited impact on global demand, as the region accounts for only about 6% of global power transformer demand (mentioned in the report). In other words, the industry’s outlook is mainly driven by grid investments and data center expansion in North America, Europe, and Asia-Pacific.

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