Transformer Oil Market Size, Share & COVID-19 Impact Analysis, By Type (Mineral Oil, Ester Liquids, and Silicone Oil), By Application (Transformers and Electrical Components), By End-use (Transmission & Distribution, Power Generation, Locomotives & Railway Lines, and Others), and Regional Forecast, 2023-2030

The global transformer oil market size was valued at USD 2.97 billion in 2022 and is expected to grow from USD 3.15 billion in 2023 to USD 4.88 billion by 2030 at a CAGR of 6.4% during the forecast period. Asia Pacific dominated the transformer oil market with a market share of 49.83% in 2022.

Transformer oil is designed to act as insulation in transformers. The oils are made up of distilling naphthenic and paraffinic crude oils through hydrogenation and hydro-treatment processes. Excess heat can lead to malfunctions and shortened component life of transformers. The smooth operation of these transformers is highly dependent on the quality and condition of the oil within each unit. The oil ensures smooth operation and is essential to maintain the thermal stress of transformers.

In addition, transformer oils are specially formulated to have high thermal conductivity and dielectric strength for cooling and insulation. Owing to its several advantages, the product is used in many applications, including distribution and power transformers, rectifiers, circuit breakers, switch gears, and others.

COVID-19 IMPACT

Plant Closures and Delayed Energy Infrastructure Activities Declined the Demand

Amid the COVID-19 pandemic, many governments across the globe restricted all kinds of transportation activities, excluding a few necessary items. Many industries were severely affected by the lockdown imposed by the governments. Fear of the virus and rising cases forced many companies to shut their production plants and field projects. International travel restrictions imposed by many governments made it nearly impossible for foreign technical experts to travel to the area, with many engineers having already returned to their home countries. Many construction and infrastructure projects were delayed, lowering the demand for transformers and leading to a reduction in sales. Leading transformer companies such as ABB, Siemens, Hitachi Energy, and others, along with suppliers such as APAR industries, TotalEnergies, and others, mentioned in their annual reports that their sales value declined in 2020. However, post-COVID-19, the demand recovered, resulting in positive growth and high sales in 2021.

Transformer Oil Market Trends

Momentum toward Long Distance Transmission to Shape the Trajectory of the Market

Since the past decade, the increasing importance of UHV DC (ultra-high voltage direct current) transmission lines for high power transmission over very long distances (more than 1000 km) has necessitated the development of UHV power transformers. Increased demand for energy globally is pushing the boundaries of conventional resources and is being met by drawing resources far from the place of usage. Energy production from renewable energy resources such as wind, solar, and hydropower is rising. These renewable energy sources are location-dependent, leaving no option apart from long-distance transmission. Long-distance transmission requires UHV power transformers, which can utilize nearly 2 kilo liters of transformer oil. The increasing demand for long-distance transmission is projected to shape the trajectory of the transmission oil market.

Transformer Oil Market Growth Factors

Growing Demand for Additional Electricity from Emerging Sectors such as High-Performance Computing and Electric Vehicles to Fuel Market Growth

High-performance computing (HPC) has recorded significant demand in recent years owing to the increasing usage across all industries for real-time insights. For instance, credit card fraud detection can only be done by using HPC, and as fraudsters constantly change tactics, it will require more complex programming to deal with it. Similarly, HPC is used in cancer diagnosis, genome sequencing, and molecular modeling in healthcare and life science industries. The adoption of high-performance computing is fueling the demand for electricity, which will drive the transformer oil market growth.

Electric vehicles are encouraging government bodies to expand their utility network, triggering the demand for additional electric grids globally. According to the International Energy Agency, the global electric vehicle fleet consumed about 110 TWh of electricity in 2022, which is less than 0.5% of the global final electricity consumption. The number seems small. However, the high adoption rate of electric vehicles across the globe is set to create a humongous demand for new transmission and distribution transformers.

RESTRAINING FACTORS

Heightened Usage of Dry Type Transformer to Hamper Market Growth

Liquid-filled transformers are compact and cost-efficient solutions for electricity distribution. However, it has certain drawbacks. For instance, they cannot be deployed where fire safety is the priority. Oil-type transformers are laced with flammable liquids and are more prone to fire. To address this discrepancy, customers choose dry-type transformers that do not contain flammable liquid and rely on robust insulation to maintain the required operating temperatures. Dry-type transformers come with fewer regulatory mandates for installation and operation.

Owing to low fire risk and low translating costs, it is an ideal choice for hospitals, malls, airports, and others. It is also used in underground substations, mining & marine sites, and other industrial applications. Several advantages and moderate demand for dry transformers will lead to a decline in the sales of oil-type transformers in many applications, hampering the market growth.

Transformer Oil Market Segmentation Analysis

By Type Analysis

Mineral Oil Segment Accounted for Major Share Owing to its Cooling Properties

Based on type, the market has been segmented into mineral oil (naphthenic and paraffinic), ester liquids, and silicon oil.

The mineral oil segment accounted for the largest share in 2022 and is poised to maintain its dominance during the assessment period. Mineral oils are generally refined from naphthenic or paraffinic base oil. This oil offers excellent cooling to transformers and prevents corona and sparks in power and distribution transformers. These properties drive its demand in transformer applications.

Ester liquids have emerged as a biodegradable solution in the industry. Ester liquids can be sourced synthetically or naturally from vegetable oils, making it an ideal choice for customers who want to shift toward green solutions. Such oil products will create an additional revenue stream in the market. In addition, growing demand for bio-based and recyclable transformer oil is set to create remunerative opportunities for players offering such biodegradable products.

Silicon-based oil can be used for transformers and other electrical equipment such as switches, circuit breakers, fuses, and others. Silicon oil offers more security than traditional mineral oil as it is extremely stable, reducing the fire and explosion risk driving its demand in the foreseen period.

By Application Analysis

Efficacy to Offer Smooth Operation Has Made Transformers Segment the Largest Consumer

Based on application, the market is segregated into transformers and electrical components.

Transformer oil is an excellent electrical insulating liquid, making it a choice of solution for all types of transformers. The oils are a key component in oil-type transformers as they maintain conductivity and temperature, ensuring smooth operation of the transformer. Its high consumption in transformers makes it the largest consumer segment in terms of application.

The electric component segment is poised to record moderate demand during the forecast period. Transformers are a crucial component in power sectors, and they must be insulated to maintain their operational efficiency. Transformer oils act as insulation, maintaining the transformer’s temperature and protecting against wear and corrosion. The oils are also used in high-voltage electrical components such as transformers, capacitors, switches, and circuit breakers.

By End-use Analysis

Transmission and Distribution Segment Exhibits the Largest Share Owing to Extensive Transformer Implementation

By end-use, the market is fragmented into transmission & distribution, power generation, locomotives & railway lines, and others.

Distribution transformers operate within the distribution network at voltages between 10 and 35 kV and capacities up to 6300 kVA and supply power directly to end-users. Distribution transformers perform the final voltage conversion of the distribution system. It converts the high voltages used in transmission lines to one suitable for household and commercial applications making it an important component of the electricity grid infrastructure. Owing to the wide installation of transmission and distribution transformers in any given city, this segment is identified as the largest consumers of transformer oil.

Power generation is identified as another most important segment for market suppliers as it is a highly complex engineered product subjected to enormous electrical and mechanical loads. Apart from a huge load, it also holds a large amount of oil quantity, making it a significant consumer in the market. The power generation segment also includes UHV power transformers made to stand against high electrical loads and are also used in special applications. This increases the need for highly pure transformer oils to maintain the smooth operation of such transformers. As a result, the power generation segment is set to create additional demand in the global market.

REGIONAL INSIGHTS

By geography, the market has been studied across North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

Asia Pacific stood at USD 1.48 billion in 2022. Asia Pacific is the largest electric consumer in the world on the back of China, India, and Japan. These countries have wide distribution and power transformer infrastructure due to increased electric demand. As a result, this region accounted for the largest global transformer oil market share in 2022. China and India, being developing nations, have various investment plans to expand their electric grid network. China is the leading country in the region due to high product demand. The above mentioned scenario is projected to help maintain the region’s dominance in the market during the forecast period.

The U.S. is among the top five electricity producers and consumers in the world and has one of the world's advanced electric grid networks. According to the U.S. Energy Information Administration, the country's electricity consumption was about 4 trillion kilowatt-hours (kWh) in 2022. This consumption is almost 14 times more than electricity consumed in 1950. Such huge electricity demand has surged the installation of power and distribution transformers in the region, fueling sales in recent years.

Europe is among the most developed economies with a wide presence of established electric infrastructure. However, the Union of the Electricity Industry has found that around one-third of Europe’s grid infrastructure is over 40 years old. This will create a need for replacements, driving the demand for transformers and transformer oil. As a result, Europe will represent moderate growth during the forecast period.

Latin America is projected to exhibit a moderate growth rate over the assessment period. The growth is anticipated on the back of Brazil and Mexico. Growing investments by the U.S. International Development Finance Corporation to develop the necessary infrastructure for the urban population in Africa and Jordan are set to fuel the African market during the forecast period.

List of Key Transformer Oil Market Companies

Product Innovation to Remain Key Strategy by the Players to Enhance their Brand Value

Apar Industries Limited, Nynas AB, TotalEnergies, and Sinopec Corp are some of the major players identified in the global market study. It has been observed that leading companies are primarily focused on several organic strategies to enhance their brand value among their competitors. Companies such as APAR Industries Limited, Cargill, and Nynas have included bio-based offerings in their product portfolio to align with the go-green trend.

LIST OF KEY COMPANIES PROFILED:

• Apar Industries Limited (India)


• Cargill (U.S.)


• Sinopec Corp (China)


• Nynas AB (Sweden)


• Total Energies (France)


• Dow (U.S.)


• Calumet Specialty Products Partners, L.P. (U.S.)


• Powerlink Oil Refinery Ltd (India)


• Wacker Chemie AG (Germany)


• HP Lubricants (India)

KEY INDUSTRY DEVELOPMENTS:

• June 2023: M&I Materials Ltd. launched a new product in its range of ester transformer fluids. Through recycling of in-service fluid, the ester transformer fluid is derived, which makes it environment friendly.


• May 2023: Apar Industries Limited launched 99% biodegradable natural ester transformer oil. This strategic product launch would allow the company to compete against foreign companies in foreign markets such as the U.S., Germany and others.


• December 2022: Fuji Electric Co., Ltd. launched a new product line of transformers that will be prefilled with FR3 fluid as electrical insulating oil.


• September 2020: Shell launched a biodegradable product named Shell Diala S5 BD. This oil is made from gas-to-liquids (GTL) technology, which eliminates the risk of corrosion caused by sulfur.

REPORT COVERAGE

The research report provides a detailed market analysis and focuses on crucial aspects such as leading companies, types, applications, end-user industries, and products. It also provides quantitative data regarding volume and value, market analysis, research methodology for market data, insights into the market trends, and highlights vital industry developments and the competitive landscape. In addition to the above mentioned factors, the report encompasses various factors contributing to the market growth in recent years.

Report Scope & Segmentation