Transformer Steel Becomes a Trade Flashpoint in Europe

The latest front in the ongoing global transformer shortage may be a disagreement over steel. To be precise, that steel is a specialty called grain-oriented electrical steel (GOES). It’s a key ingredient in the majority of the world’s transformers—and in Europe, it’s now a trade flashpoint.

Last month, the European Commission, the European Union’s main executive branch, significantly raised the cost of importing GOES from outside the EU. While EU steelmakers believe the measures are necessary to protect their industry at a turbulent time, many in the energy sector have been far more critical. They believe restricting GOES imports will only make it harder for Europeans to find the steel their transformers need—and risk slowing down Europe’s electrification.

“European producers can currently neither supply the volumes nor the highest-performance grades necessary to meet the demands of the transformer industry,” says Mark Becker-von Bredow, Director of Energy, Electrification and Climate at the German Electrical and Digital Industry Association (ZVEI). The Basics of Grain-Oriented Electrical Steel GOES is not a garden-variety steel, which is an alloy of iron combined with carbon to provide strength. An electrical steel like GOES instead blends iron with silicon, which instead improves the metal’s electrical properties.

There are several electrical steel varieties, but the “grain-oriented” in GOES separates it from the others. Examine any steel under an electron microscope, and you’ll see a mosaic of tiny crystal grains.

Unlike in most steels, the grains in GOES are aligned in one direction. This trait reduces energy loss in situations where a magnetic field flips back and forth along that direction—which is precisely what alternating current does many times per second in a transformer’s core.

GOES cores can minimize power loss, emitted heat, and audible noise, all making for a more efficient transformer. That’s why GOES is the dominant material in transformer cores today.

GOES, however, also differs from conventional steel in its economics. “Because it’s a specialty good, it’s more comparable to other specialty goods like, say, computer chips,” says Ryan Alimento, an analyst at the U.S.-based Breakthrough Institute.

Compared to the number of steelmakers around the world, there are far fewer specialized GOES producers. As with chipmakers, their products can vary.

A higher-quality GOES loses less energy and helps build a better transformer. Transformer manufacturers may pay close attention to where their GOES comes from.

“The global leaders—the companies that make the world’s best GOES—by and large are in [South] Korea and Japan,” Alimento says. And in the EU, domestic manufacturers are not capable of making that quality of GOES, because it is a heavily protected trade secret.” In fact, just two EU steelmakers today ( Thyssenkrupp and Stalprodukt) manufacture GOES at all.

This is partly because Europe’s electricity demand stayed relatively flat for decades, and demand for grid components like transformers has likewise been modest. Europe’s Growing Electrification Needs Today, the story has changed.

Renewables, electrification, data centers, and the EU’s own ambitious grid expansion plans mean that transformers in Europe are on the rise. According to the European Commission’s numbers, from 2021 to 2025, the EU’s GOES consumption increased by 32 percent.

Yet EU steelmakers have seen few benefits. Their share of the EU GOES market dropped from 66 percent to 43 percent over that period, even as the volume of GOES imports more than doubled.

More than half of those imports now come from China, fuelling fears that overcapacity at Chinese steel mills is undermining their EU counterparts. Since December 2025, Thyssenkrupp has slashed GOES production in response to “the massively increased inflow of low-priced imports, especially from Asia.” It was in this environment that EU steelmakers pushed the European Commission to act.