COVID-19 Impact on Transformer Oil in Chemical and Materials Industry

COVID-19 Impact on Transformer Oil in Chemical and Materials Industry

  • Chemical and Materials
  • Sep 28, 2020

COVID-19 Impact on Transformer Oil in Chemical and Materials Industry

In the oil industry, each dealer has predicted the crises that will occur due to the pandemic situations that the COVID-19 is generating globally in the oil market but COVID-19 has the mixed pattern situation for the oil companies in developing countries. At the same time, the demand for transformer oil that are not used on a more frequent basis has decreased as a result of lock-down and halting of manufacturing units in various regions. For the product ranges sold by manufacturers / dealers, the effect of COVID-19 on the oil industry can be seen.

The coronavirus crisis is affecting transmission and distribution, power generation, railways & metros, and other applications of transformer oil. On the other hand, its impact on oil markets is particularly severe because lockdown in regions has stopped import and export, dealing a heavy blow to demand for oils which have also reduced due to less consumption of fuel owing to decreased electricity demand from manufacturing units and commercial spaces.

For instance,

  • Due to COVID-19, BASF SE sale went down by 12% in 2020 which created huge impact on company’s performance
  • Ergon has introduced new HyVolt C50A transformer oil which might help to increase their market share in the COVID-19 situation. The product can sustain and function normally in extreme cold weather conditions
  • In North America, Ergon has announced an increase in price of naphthenic oils, which will be applicable from 31st July 2020

IMPACT OF COVID-19 ON TRANSFORMER OIL

In December 2019, the appearance of corona virus in China and gradual expansion of the epidemic drastically brought down demand and price of the transformer oil. Lockdown is in force in Italy, Germany, India, UK, South Africa, Morocco, and Spain. Corona driven lockdowns call for people to “stay at home” and avoid unnecessary travels. Essentially, corona restricts all forms of mobility therefore oil consumption by the transportation industry such as trains and ships bound to fall sharply.

COVID-19 have impacted supply chain the most as due to the lock down in the several countries, the import and export become difficult and also the demand have lower down which have impacted transformer oil market. Several transformer oil production plants expansions are on hold as the market has lesser demand of the raw materials which are produced by refining the oil.

The energy producing companies have been affected badly with the spread of the corona virus as in Texas, U.S., several industries who were engaged in the oil refining and producing are shuttering down the business due to the collapse of the oil industry and countries such as the U.S., Saudi Arabia and Russia are engaged in price war due to pandemic situation.

As most of the transformer oil producers are in India and the U.S., the impact have deepened further since the leading producers are facing problems due to lower demand in the developing nations. In the pandemic situation, the prices of the transformer oil also falls down. The developing countries have also faced the problem of the storage of transformer oil as the demand was less which lead to increasing storage capacity demand which increases the cost of the production resulting into the down fall in the transformer oil industry.

IMPACT OF COVID-19 ON BIO-BASED TRANSFORMER OIL

Bio-based transformer oil is environmentally safe and also has better performance than mineral oil products. Bio-based transformer oil has better resistance to protect from the fire as compared to their counterpart mineral oil.

Several tenders and plant implementation have gone on hold as the transformer oil market have very less demand of the raw materials which are required to produce bio-based transformer oil. Bio-based transformer oils are costly as compared to their peers and no company be it the private or government, are looking towards sustainable oils at this point of time. Every company is sourcing the cheapest oil available in the transformer oil market.

STRATEGIC INITIATIVES DURING COVID-19

  • Nyas company increased the level of supply security while transportation of oil. The company checks their transportation while entering or exiting from the company
  • Cargill, Incorporated is working with non-profit and NGO partners around the globe and also provide basic necessary goods which include food, health and safety needs. These steps are valuable for the company and help to create a goodwill in society

Through adopting different strategies such as growing manufacturing efficiency, new product launches, and product distribution, the manufacturers seeks to achieve optimal market development. The exponential growth of transformer oil in sectors such as electrical distributions is projected to provide attractive prospects for key market players. This is anticipated that variables such as the locations for distribution and sales can help boost the overall position of the business. Small domestic players and especially emerging players in developed countries are likely to obtain opportunities to position themselves in the marketplace.

CONCLUSION

COVID-19 collapsed the transformer oil industry as transformer oil demand plummeted as a result of which the price dropped too. Also, the crude oil prices during the lockdown went down in negative. Due to the long-term halt in production, the demand from the various areas has plummeted. COVID-19 has impacted the relation between different regions as import and export have stopped as a result of which oil producers have to face losses.

Several manufacturers closed the oil refineries due to heavy lose. The companies are making the strategic actions to increase the demand of the transformer oil in the market and to increase the price so to earn revenue and government is also helping the manufacturers by making policies which help manufacturers to maintain stability. Many manufacturers are adopting new technologies to gain the profit and turns down the situation into their favor.

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