Transformer Oil Market

[274 Pages Report] The global transformer oil market in terms of revenue was estimated to be worth USD 2.0 billion in 2023 and is poised to reach USD 3.0 billion by 2030, growing at a CAGR of 5.9% from 2023 to 2030. The growth in transformer oil demand in recent years is due to the increased investment in transmission and distribution projects due to growing urbanization. The market for transformer oils is projected to benefit greatly from the rising expansion of smart electricity grids and networks.

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Transformer Oil Market Dynamics

Driver: Modernization of electric grids and adoption of smart grids in developed economies

To conduct business without interruption and to reinforce the growth of the global economy, reliable delivery of electricity is critical. The growing energy demand has resulted in the need for a stable and reliable T&D network. The electric grid and the T&D equipment have aged over the years in the US, European regions, and a few parts of APAC. For instance, 70% of the power transformer and transmission lines in the US are over 25 years old. Similarly, as of 2022, one-third of the European Union's grid network is over 42 years old, and this share is projected to surpass 50% by 2030. The aging of the grid network will result in a drop in the efficiency of power delivery and affect the reliability of the electric grid and T&D network. This has led the US and European economies to modernize their electric grids by transitioning towards adopting smart grids. Recently, Western Europe is reportedly to invest USD 133.7 billion in smart grid infrastructure by 2027 to accommodate the rising electricity demand and upgrade aging power assets. Similarly, in the APAC region, India and South Asian participants have agreed to invest USD 25.9 billion to modernize their grid network over 2020–2029.

Restraint: Increasing demand for dry-type transformers

Dry-type transformers are constructed with their windings and the core placed inside a sealed tank pressurized with air, unlike oil-filled transformers where the windings and the core are immersed in an insulating liquid. Further, installing dry-type transformers involves less stringent regulatory requirements for operation and maintenance. Dry-type transformers are less flammable, unlike oil-filled transformers, which are usually filled with flammable liquids such as mineral oil. Due to safety concerns and growing environmental awareness, dry-type transformers are favored over oil-filled transformers. This drives the demand for dry-type transformers, particularly in regions such as Europe and the US. This increase in the demand for dry-type transformers will have a negative impact on the adoption of oil-filled transformers, which will be a restraint for the market.

Opportunities:  Increased investment in HVDC transmission systems

The world economies are transitioning towards adopting renewable energy sources such as solar, wind (onshore and offshore), biomass, hydroelectric, and geothermal power. As these resources are often sourced at remote locations far from population centers, companies deploy HVDC transmission systems to connect such remotely located power generation sources and minimize transmission losses. The significance of the HVDC transmission system lies in its efficient bulk power transmission capabilities over long distances. Further, HVDC transmission systems offer enhanced stability, reliability, and transmission capacity. Thus, they become an integral part of the electrical power system.

Challenges: Constand Fluctuations in crude oil prices

Crude oil plays a vital role as the primary energy source for conducting economic activities, and the unpredictability surrounding the fluctuations of crude oil prices significantly impacts economic stability. Transformer oil is a by-product of crude oil, which is highly refined, processed, and purified. Thus, the fluctuations in crude oil prices directly impact transformer oil price for manufacturers. In 2017 and 2018, crude oil prices experienced an upward trajectory, increasing demand for production enhancement activities. However, prices subsequently declined in 2019 and 2020, followed by a consistent increase in 2021. These fluctuations in crude oil prices created an environment of uncertainty, making it challenging for transformer oil manufacturers to make informed decisions regarding the purchase of crude oil at favorable prices.

Transformer Oil Market Ecosystem

Prominent companies in this market include well-established, financially stable transformer oil manufacturers. These companies have been operating in the market for several years and possess a diversified product portfolio, state-of-the-art technologies, and strong global sales and marketing networks. Prominent companies in this market include Nynas AB (Sweden), Ergon, Inc. (US), PetroChina Company Limited (China), Shell (UK), APAR Industries (India), and Calumet specialty products partners, L.P. (US).

The bio-based segment, by oil type, is expected to be the second-fastest growing market during the forecast period.

This report segments the transformer oil market based on type into three types: mineral oil, silicone oil, and bio-based oil. The bio-based oil segment is expected to be the second fastest-growing market during the forecast period. Bio-based transformer oil is derived from various vegetable feedstocks and formulated depending on requirements and market conditions. Bio-based oil is less hazardous than mineral oil or silicone oil; thus, the rising environmental concerns drive the bio-based oil market.

By application, the transformer segment is expected to be the fastest growing during the forecast period

This report segments the transformer oil market based on application into three segments: transformer, reactor, and switchgear. The transformer segment is expected to grow at the fastest rate during the forecast period. Transformer oils are extensively used in power and distribution transformers. Growing power demands and aging transformers will likely lead to installing new transformers, which is anticipated to increase the demand for transformer oils.

"Asia Pacific": The fastest in the transformer oil market"

Asia Pacific is expected to fastest growing region in the transformer oil market between 2023–2030, followed by Europe and North America. Urbanization and population growth have resulted in the need for vast infrastructure development, which has propelled the energy demand across the region. This has further resulted in an energy demand-supply gap, resulting in a power supply shortage. Electricity shortage is expected to support market growth as it can be attributed to the increasing demand for power leading to the installation of new substations, increasing the demand for transformers, reactors, and switchgear, and increasing the demand for transformer oil.

Key Market Players

The market is dominated by a few major players that have a wide regional presence. The major players in the transformer Oil market include Nynas AB (Sweden), Ergon, Inc., Petrochina Company Limited (China), Shell (UK), Calumet specialty products partners, L.P. (US). Between 2018 and 2022, these companies followed strategies such as contracts, agreements, partnerships, mergers, acquisitions, and expansions to capture a larger share of the market.

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Scope of the Report

This research report categorizes the market by oil type, application, end-user, and region.

On the basis of oil type, the transformer oil market has been segmented as follows:

• Mineral Oil
  • Naphthenic Oil
    • Inhibited
    • Uninhibited
  • Paraffinic Oil
    • Inhibited
    • Uninhibited
• Silicone Oil
• Bio-based Oil

On the basis of application, the market has been segmented as follows:

• Transformer
  • Power transformer
  • Distribution transformer
• Reactor
• Switchgear

On the basis of end-user, the market has been segmented as follows:

• Transmission and Distribution
• Railways & Metros
• Power generation
• Others

On the basis of region, the market has been segmented as follows:

• Asia Pacific
• Europe
• North America
• Rest of the World

Recent Developments

• In October 2022, Nynas AB launched the new transformer fluid named NYTRO RR 900X. It is a circular transformer fluid based on refining technology. NYTRO RR 900X is high-grade oil used in various electrical applications, including high voltage and high-power transformers.
• In December 2021, MIDEL, a transformer oil manufacturing brand of M&I Materials Limited, was awarded a three-year contract by First Philec Inc, to supply MIDEL transformer oil for their transformers to minimize the risk of fire and damage
• In May 2021, Calumet Specialty Products Partners, L.P. partnered with Aevitas, Inc. to improve access to exclusive transformer oil products in the Canadian market. The company's new arctic-grade transformer oil will be distributed exclusively by Aevitas, Inc. across Canada, as a result of this partnership.
• In May 2021, Cargill, Incorporated. partnered up with Delta Star, Inc. to provide retro-filling services for its Envirotemp range of dielectric fluids to its consumers in the Western United States. The agreement designates Delta Star, Inc. as a Cargill, Incorporated service center in the Western United States market.  

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