Morgan Stanley: The super cycle in the U.S. transformer market will continue until 2030

Morgan Stanley’s latest research report indicates that driven by grid modernization, renewable energy transformation, and surging electricity demand, the U.S. transformer market has entered a super cycle lasting until 2030, with a significant supply-demand imbalance.

Data shows that since 2021, the apparent consumption of large power transformers over 100 MW has increased more than threefold, with a compound annual growth rate of about 37% from 2021 to 2025. U.S. import dependence has risen from approximately 70% in 2021 to over 85% currently, and is expected to remain above 80% over the next decade. In 2024, only 200–300 large transformers will be produced domestically, while from 2025 to 2030, about 4,300 units will be needed to support new energy capacity, creating a huge capacity gap. The market size is projected to expand at a compound annual growth rate of 14%.

On the demand side, electricity demand will grow structurally, with a compound growth rate of about 2.6% until 2035. Data centers will contribute 78% of the increase, with electricity use growing by 37% over the next five years, increasing their share of total demand from 6% in 2024 to 18% in 2030. The share of renewable energy will also rise from 23% in 2024 to 32% in 2035, driving demand for transmission and distribution equipment.

On the supply side, new capacity will mainly be released between 2027 and 2029. Currently, order backlog is 2–4 years, with transformer prices increasing 4–9 times over three years, and delivery cycles extended fourfold. Morgan Stanley expects industry profit margins to remain high through 2030.