In 2026, the global high-magnetic induction oriented silicon steel (Hi‑B/CRGO) entered a comprehensive shortage cycle, with the five major markets of the United States, Mexico, Southeast Asia, India, and Europe simultaneously experiencing a situation of high-end grades in short supply, extended delivery cycles, and firm prices. The core driving forces come from four major factors: the renovation of aging power grids, the grid connection of new energy, the explosion of AI computing power, and the mandatory upgrading of energy efficiency regulations; while the high concentration of global high-end production capacity, long expansion cycles, and high technical barriers make it difficult to bridge the short-term supply and demand gap.

1. Europe: Green transformation + new energy efficiency regulations, leading to an explosion of high-grade steel demand

– Strong policy push: The EU’s “Fit for 55” initiative, coupled with the Ecodesign Regulation (ErP), will ban inefficient transformers from 2025 onwards, mandating the use of ultra-thin high-magnetic induction silicon steel with a thickness of 0.18–0.20mm.- Grid upgrade: The European Union has invested 584 billion euros to upgrade the power grid, with the goal of eliminating 30% of outdated transformers and replacing them all with Hi-B cores by 2026-2028.- Supply-demand gap: The high-end production capacity in Europe can only meet 30% of the demand, with 70% relying on imports; Germany, France, and the UK account for 55% of regional demand, and the gap is expected to exceed 150,000 tons by 2026.- Import preference: Prioritize the procurement of Chinese products with high magnetic induction, low loss, and green certification. China’s exports to Europe increased by 138% year-on-year in 2025.

2. The United States: Aging power grid + Explosion in AI computing power, with high-end silicon steel heavily reliant on imports

– Current state of the power grid: Transformers in the United States have been in service for an average of 35 years, with 38% exceeding their lifespan, making a comprehensive replacement urgently necessary.- Surge in demand: Driven by the triple factors of AI data centers, grid integration of new energy, and the return of manufacturing industry, the demand for transformers is expected to reach 12,000 MVA in 2026, representing a year-on-year increase of 25%.- Production capacity shortcomings: In the United States, only AK Steel produces oriented silicon steel, and this is limited to medium and low grades, with a complete blank in high-end Hi-B products.- Import dependence: 90% of CRGO in the United States relies on imports (from Japan, Germany, and China). In 2026, the demand is 120,000 tons, while domestic supply is only 35,000 tons, resulting in a 70% gap.- Delivery cycle: Transformer orders are scheduled until 2029, with a delivery cycle of 2.5 to 4 years, and steel is hard to come by.

3. Mexico: Manufacturing Transfer from North America + Power Grid Reinforcement, Taking Over the Shortfall from the United States

– Manufacturing transfer: The production capacity of transformers in the United States is shifting to Mexico, making Mexico the manufacturing hub for transformers in North America.- Grid investment: Mexico’s national grid transformation + new energy grid connection, with transformer demand increasing by 30% year-on-year in 2026.- Raw material shortage: Mexico relies 100% on imports for its non-oriented silicon steel production capacity, with priority given to China and Japan for high-end Hi-B materials.

4. Southeast Asia: Industrialization + Grid Infrastructure Construction, Explosive Demand for Mid-to-High-End Products

– Regional growth: Vietnam, Thailand, Indonesia, and the Philippines are experiencing accelerated industrialization, with upgrades to power grids and expansions in home appliance manufacturing. Demand for silicon steel is expected to increase by 20% year-on-year in 2026.- Structural upgrade: Improved energy efficiency standards, with the proportion of high-end oriented silicon steel increasing from 35% in 2023 to 55% in 2026.- Insufficient supply: Southeast Asia lacks local high-end production capacity and relies on 100% imports; Chinese products dominate due to their cost-effectiveness (10-15% cheaper than Japanese goods) and stable supply.

5. India: Infrastructure boom + new energy explosion, severe shortage of high-end silicon steel

– Grid expansion: India’s “Universal Electricity” plan + UHV construction, transformer demand in 2026 is expected to increase by 40% year-on-year.- New energy drive: With the boom of photovoltaic/wind power grid integration, the demand for step-up transformers has surged, necessitating the use of high magnetic induction Hi-B silicon steel.- Capacity bottleneck: In India, only SAIL and JSW have a small amount of production capacity, and there is almost no production capacity for high-end Hi-B products, with 90% relying on imports.- Widening gap: By 2026, the gap in oriented silicon steel in India will exceed 80,000 tons, with a delivery cycle of 6-12 months.

6. Global supply and demand pattern: China becomes the only stable high-end supply source

– Global production capacity: The annual production capacity of oriented silicon steel is approximately 1.95 million tons, with China accounting for 60% (4.46 million tons); in the high-end Hi-B segment, China accounts for over 80%, led by Baowu and Shougang.- Expansion cycle: Invest billions in high-end production lines, with a construction period of 18-24 months, and no new large-scale production capacity will be added before 2028.- Export policy: China will implement a licensing system for silicon steel exports starting from January 2026, restricting low-end products while ensuring high-end products, and giving priority to meeting the global demand for high-grade silicon steel, which is in short supply.

7. Conclusion: The shortage of high-end talent will persist from 2026 to 2028

The combination of global green transformation, energy efficiency upgrades, and AI computing power expansion will result in a shortage of high-end oriented silicon steel in the United States, Mexico, Southeast Asia, India, and Europe, which will last at least until 2028. China, with its four major advantages of technology, production capacity, cost, and delivery cycle, has become the ballast for global high-end silicon steel supply.

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