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USA flags insufficient transformer steel output as threat to national security

USA: The USA flagged a national security threat to its power grid after the sole producer AK Steel.

It said that the subsidiary of Cleveland-Cliffs Inc. could stop producing grain-oriented electrical steel, a key material used in manufacturing transformers, due to unprofitability.

“If this manufacturer were to shut down grain-oriented electrical steel (GOES) production, the USA would be completely dependent on foreign sources for material critical to the manufacture of transformers,” the US Department of Commerce Bureau of Industry and Security said in a report of 18 November.

“There is insufficient or no domestic production capability for certain grades and qualities of GOES that are increasingly in demand to meet efficiency standards for distribution transformers as well as general market trends toward more efficient transformers using higher grades of GOES,” the report said.

Transformers are used to step up and step down power voltages throughout the electrical grid and are fundamental to the efficient transmission and distribution of electricity in the USA.

According to the agency, domestic transformer manufacturers rely on foreign sources, especially Canada and Mexico, for the critical components to meet over 75 % of noncaptive demand. The USA also depends on imported transformers, most significantly the large power transformers that form the bulk power system backbone.

“This investigation found shortcomings with regard to domestic production of large power transformers that are critical elements of the United States bulk power system,” the report said. “Because they serve the greatest number of customers, the failure or destruction of just a single unit can have a large impact on the US economic, public health, and security interests.”

The report recommended the USA negotiate either bilaterally or trilaterally with Canada and Mexico to reduce imports or to utilize more US GOES in their transformer production; impose tariffs or quotas on imports of some or all of the products subject to the investigation; and / or provide direct production subsidies or research and development, capital expenditure loans or other financial incentives to support domestic production of key materials.


Source: S&P Global