Inside the Electrical Steel Trade

The electrical steel supply chain is one of the most concentrated in industrial materials. A handful of companies (industry estimates put the number at fewer than a dozen for grain-oriented steel) control the entire sequence from molten iron to finished magnetic core. The chain is deep, technically demanding at every stage, and built on metallurgical know-how that transfers slowly if at all. Understanding how it is structured explains why new entrants face such high barriers and why India's import dependence is not a purchasing problem but a capability problem.

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Five steps from molten iron to magnetic core

CRGO production is a linear value chain with five distinct stages. Each stage adds value, raises the technical bar, and narrows the number of companies that can perform it.

It starts in the melt shop

CRGO starts as liquid steel with a specific silicon content (approximately 3 to 3.3%) and precise chemistry for grain-growth inhibitors. The melt must contain controlled amounts of manganese, sulphur, aluminium, and nitrogen. The elements that form MnS and AlN inhibitor particles during solidification. This is not exotic metallurgy, but it requires continuous casting with chemistry tolerances tighter than commodity steel. Any integrated steelmaker with a quality-grade BOF or EAF shop can produce the starting slab.

The hot-band that cannot travel

The silicon-steel slab is hot-rolled into a strip (the "substrate" or "hot-band") at a conventional hot-strip mill. The chemistry set in Stage 1 is preserved; the rolling temperature and reduction schedule are controlled to set the initial grain structure. This is where the thyssenkrupp lesson applies: shipping hot-band across oceans adds logistics cost that kills competitiveness. Local substrate production is the structural requirement for any CRGO project in India.

Stage three is where the difficulty lives

This is where the value (and the difficulty) concentrates. The hot-band is cold-rolled to final thickness (0.23 to 0.35 mm), subjected to a decarburisation anneal to remove carbon, coated with a magnesia-based separator, and then high-temperature annealed at approximately 1,200°C for secondary recrystallisation. During this anneal, the Goss-oriented grains consume all others, creating the aligned crystal structure that gives CRGO its magnetic properties.

The process depends on inhibitor chemistry. The MnS and AlN particles that selectively block the growth of misoriented grains. Getting the inhibitor dispersion right requires control of every upstream variable: melt chemistry, casting parameters, hot-rolling temperatures, cold-reduction ratios, and anneal schedules. The process windows are narrow and the know-how is tacit, transferred through JV partnerships, not through equipment manuals.

This is the stage that, by industry estimates, fewer than twelve companies worldwide can perform. The number of producers has not grown in decades despite growing demand, because the metallurgical learning curve is steep and the capital at risk during ramp-up is large.

Scribing the domains

The highest-performance CRGO grades undergo domain refinement. A post-processing step where the magnetic domains within each grain are subdivided by laser scribing or plasma irradiation. This reduces core losses by 5 to 15% beyond what grain orientation alone achieves. The equipment and process know-how for domain refinement sit with three to four companies: Nippon Steel (laser and plasma), JFE (plasma), POSCO (laser), and thyssenkrupp (laser). Domain-refined CRGO commands a price premium and is used in the highest-efficiency transformers.

At the transformer factory

CRGO exits the steel mill as finished coils. Transformer manufacturers slit these coils to width, cut core laminations, stack or wind them into transformer cores, and assemble the complete transformer with windings, insulation, and tank. This stage has hundreds of participants globally. India alone has dozens of transformer manufacturers, from CG Power and Hitachi Energy to smaller regional players. The transformer industry is the customer, not the competitor, of the CRGO supply chain.

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So where does the chain actually pinch?

The defining characteristic of the CRGO supply chain is that concentration increases at each stage. Raw materials (iron ore, ferrosilicon) are globally abundant. Hot rolling is a commodity capability. But the grain-orientation process (Stage 3) is held by fewer than twelve companies, on industry estimates, and domain refinement (Stage 4) by three to four.

This funnel structure means that the bottleneck in the supply chain is not at either end (raw materials or end products) but in the middle, at the grain-orientation process. A country can have abundant iron ore (India does) and a large transformer industry (India does) and still be 90% import-dependent on CRGO, because it lacks the middle step.

Four countries, four postures

CRGO trade flows are shaped by the producer concentration. Four countries (China, Japan, South Korea, and Russia) account for the vast majority of global GOES exports. Each has a distinct trade posture.

Where does China's surplus go?

China exported 666,300 tonnes of GOES in 2024, up 34.7% from 494,800 tonnes in 2023. Exports are projected to exceed 700,000 tonnes in 2025. The growth is driven by overcapacity: Chinese GOES output of 2.95 million tonnes exceeds domestic demand, and new capacity additions (TISCO +80,000 tonnes, Hunan Valin +100,000 tonnes) are widening the surplus.

China's export destinations are shifting. Traditional markets in Asia (India, Southeast Asia) remain the largest, but trade-routing patterns are emerging. Mexico received 71.8% more Chinese GOES in the first half of 2025 than the same period in 2024. Vietnam showed a 57.6% increase. Both countries serve as assembly gateways for goods entering markets with anti-dumping duties on Chinese steel.

Meanwhile, China imposed its own anti-dumping duties on GOES from Japan, South Korea, and the EU in July 2022. The asymmetry is striking: China protects its domestic GOES market from premium imports while flooding other markets with its lower-grade exports.

Japan guards the recipe

Nippon Steel and JFE are the technology leaders in GOES. Nippon Steel's ORIENTCORE HI-B was the world's first high-permeability grain-oriented steel. Japan exports Hi-B and domain-refined grades that command premium prices and are qualified by the most demanding transformer OEMs. Japanese GOES exports serve a different market segment than Chinese exports, higher grades, higher prices, and specific qualification requirements.

Japan's trade posture is defensive: protect the technology, license selectively through JV partnerships, and export the finished product. JFE's partnership with JSW in India follows this model. Nippon Steel's presence through AM/NS represents a potential second entry point.

POSCO's downstream play

POSCO is the primary GOES exporter from Korea. Its PHD-Core domain-refined line represents competitive technology. POSCO's trade strategy is expansionist. It is investing in overseas partnerships (the JSW JV in India, multiple ventures in Southeast Asia) to secure downstream markets for its steel products, including electrical steel.

Russia's narrowing routes

NLMK's VIZ-Stal plant exports over 80% of its roughly 350,000 tonnes of transformer steel. Russia's GOES reaches markets in Asia, the Middle East, and (historically) Europe. Western sanctions have complicated banking, insurance, and logistics for Russian steel exports, though India has maintained independent trade relationships with Russia in commodities and defence.

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Every producer country builds a wall

Anti-dumping duties are the primary trade instrument applied to CRGO. The pattern is global: every major CRGO-consuming country has either imposed or investigated duties on imports.

The pattern reveals a structural truth: every country with GOES production uses trade protection to sustain it. The technology is too expensive and too slow to build for companies to compete unprotected against producers who have been running for decades with fully amortised capital. Anti-dumping duties are not an anomaly in the GOES market. They are the norm. The question for India is not whether to use them, but how to calibrate them so they protect nascent capacity without crippling the transformer industry that cannot wait for domestic supply.

India's missing middle

India sits at a specific point in this supply chain. It has the upstream capability (steelmaking, hot rolling) and the downstream industry (transformer manufacturing). What it lacks is the middle: the grain-orientation process that converts silicon-steel substrate into CRGO.

This is not a raw-material problem. India has iron ore. It is not a market problem. India has the third-largest transformer market in the world. It is a technology-transfer problem: the grain-orientation process sits with a small group of Japanese, Korean, German, Russian, and Chinese steelmakers, and it moves through JV partnerships, not through equipment purchases.

The supply chain concentration means India cannot simply buy its way out of the gap. It must attract one or more technology partners willing to embed their process know-how in an Indian JV, and pair that technology with local substrate production to avoid the thyssenkrupp mistake. The PLI scheme sweetens the economics. Anti-dumping duties provide market protection. BIS certification creates quality barriers. But the core transaction is a technology partnership, and that requires a corporate decision in Tokyo, Seoul, or Yekaterinburg that no Indian policy instrument can directly compel.

For a comprehensive analysis of India's CRGO gap and the domestic production picture, see the pillar article: the complete guide to India's CRGO steel import dependence.

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