As the European Union accelerates grid electrification and expands digital infrastructure for artificial intelligence, a shortage of a critical base material is creating a severe operational bottleneck across the single market. Grain-oriented electrical steel (GOES), an advanced electromagnetic alloy required to manufacture the cores of power transformers, faces an unprecedented industrial supply crisis. Without GOES, high-voltage electricity cannot be stepped up or down for transmission, leaving offshore wind farms, solar arrays, and hyperscale compute facilities unable to connect to the grid. Yet, domestic European production of this core alloy is rapidly contracting under pressure from low-cost imports, exposing a profound structural flaw in the region's quest for strategic autonomy.
The Operational Strain at Isbergues
The problem of steel shortages is is illustrated by the situation at Thyssenkrupp Electrical Steel which is headquartered in Essen, Germany, and operates its main production facility in Isbergues, France. The company is one of only two manufacturers of GOES in Europe. At the beginning of 2026, Thyssenkrupp Electrical Steel reduced production at its Isbergues plant by 50%. In June 2026, it halted operations entirely, with the shutdown expected to last until September 2026. According to the company, the suspension was driven by a shortage of orders. Demand had weakened as customers increasingly turned to lower-priced imports from overseas producers, making it difficult for the company to compete.
Import volumes of GOES into the single market have tripled since 2022, expanding by an additional 50% in 2025 alone to capture more than half of total European market demand. Local steelmakers, burdened by high electricity prices, labor overheads, and carbon compliance costs under the EU Emissions Trading System (ETS), have struggled to match foreign pricing that often falls below domestic production costs. "Rising imports of grain-oriented electrical steel have sharply reduced orders and pushed European operations into severe underutilisation," Thyssenkrupp stated in an official press release, adding that the temporary closure was necessary to safeguard approximately 1,200 specialized industrial jobs across its European footprint.
This temporary loss of primary industrial capacity underscores a key policy contradiction. While Brussels advocates for supply chain resilience through the Net-Zero Industry Act, current market procurement practices continue to favour lower-cost foreign inputs over the preservation of domestic manufacturing.
Extended Lead Times and Grid Congestion
The decline in domestic primary production directly impacts downstream equipment manufacturers. Power transformers are custom-engineered and heavy capital assets that rely on high-grade GOES to limit energy losses during voltage conversion. The resulting supply-demand imbalance has caused equipment procurement timelines to expand sharply.
According to grid infrastructure tracking from BloombergNEF, lead times for high-voltage power transformers in Europe have stretched from a historical average of 12–18 months to between 36 and 48 months. For extra-high-voltage transmission units, delivery dates now extend well past three years.
This four-year procurement delay hurts two goals of the European Union:
- New offshore wind farms and large solar power plants in Southern Europe are stuck in long lines to connect to the grid, which means clean energy is not being used properly.
- Companies that build big digital infrastructure say that having enough transformers is now the main problem for starting new AI computing centers. This is more of an issue than getting land permits or fiber connections.
Even household companies in Europe, such as Siemens Energy and Hitachi Energy, that make transformers have lots of orders they have not finished yet. Their ability to make transformers depends critically on getting the right materials. They use steel parts from countries, which makes it hard to update the power grid when there are problems with shipping rules about sending things out or political difficulties that hinder free movement of goods.
Trade Safeguards and Regulatory Balances
In response to the domestic production strain, the European Commission’s Directorate-General for Trade initiated a formal safeguard investigation into global imports of grain-oriented electrical steel (GOES) and steel lamination cores (SLC). The investigation encompasses products classified under European customs tariff codes 7225.11.00, 7226.11.00, and 8504.90.13.
According to the official European Commission Notice of Initiation, existing anti-dumping measures based on minimum import prices (MIPs) no longer provide sufficient relief because market prices have evolved above historical baseline thresholds. The investigation looks at whether many imports are hurting or could hurt European steel companies. The final decision must be made by 27 December 2026.
However, amending the rules comes with difficult choices about the economy. While imposing strict import tariffs or restrictive quotas would protect primary domestic producers like Thyssenkrupp and secure skilled industrial employment, restricting foreign supply would raise input costs for downstream transformer builders, increasing capital expenditure requirements for transmission system operators (TSOs) and renewable energy developers.
Aligning Trade Controls with Infrastructure Goals
The situation at Isbergues demonstrates that raw material capacity remains a prerequisite for both energy and digital transitions. A plan that only looks at the use, such as. putting up solar panels or creating data centers, but doesn't protect the supply chain makes industrial systems vulnerable to external problems in the market.
To build long-term industrial resilience, European trade policy and infrastructure planning must be aligned. Policy frameworks like the EU Net-Zero Industry Act suggest targeted policy measures:
- Incorporating sustainability, carbon intensity, and supply security criteria into energy infrastructure procurement under the EU Public Procurement Framework to favor locally produced, low-carbon steel.
- Directing support from the EU Innovation Fund to assist domestic steelmakers in upgrading manufacturing lines for high-efficiency, premium-grade GOES production.
- Establishing regional stockpiles of critical electrical steel grades, as advocated by trade bodies like EUROFER, to cushion downstream original equipment manufacturers (OEMs) against sudden supply chain disruptions.
Yet, without coordinated action across the supply chain, the European Union risks replacing its historic reliance on foreign fossil fuels with a reliance on foreign industrial components. Securing foundational inputs like transformer steel remains essential for achieving true energy security and the economic competitiveness that is so desperately needed.
