As the ongoing conflict in Iran continues to reverberate through the industrial sector, the cable industry has issued a call to action to the Korea Electric Power Corporation (KEPCO). The industry has expressed concerns that a protracted conflict could lead to production disruptions for both cable manufacturers supplying cables for the national power grid and the ordering party, KEPCO.
On April 9, the domestic cable industry communicated to KEPCO its apprehensions about potential instability in the supply of raw materials due to the war in Iran. The industry fears that the war’s aftermath, which has already disrupted supplies of crude oil and naphtha, could similarly affect the supply of insulation materials. These materials are crucial components in cable production.
Polyethylene (PE) and polyvinyl chloride (PVC), indispensable for the insulation and sheath layers of cables, are derived from naphtha as a primary raw material. At present, the cable industry has secured enough stocks for approximately two months, thereby averting an immediate cessation of operations. However, if the conflict drags on, escalating raw material costs could adversely affect profitability and necessitate unavoidable cutbacks in production volumes.
Despite a two-week temporary ceasefire agreed upon by the United States and Iran and the reopening of the Strait of Hormuz, market unease remains. The cable industry, in particular, foresees potential disruptions to all national power grid expansion projects slated for the latter half of the year. This could occur if key petrochemical complexes within Iran experience reduced operating rates or if logistics risks, such as increased transportation costs, escalate.
KEPCO has already commenced comprehensive design work on the West Coast High Voltage Direct Current (HVDC) Energy Expressway project and is currently conducting large-scale cable manufacturing tenders. This project is a pivotal initiative to transport renewable energy from the West Coast to the metropolitan area. Any delivery delays caused by failures in raw material supply could pose a direct threat to national energy security. An industry official elucidated, “If there are disruptions in material supplies, there is a significant possibility that national power grid projects will also be delayed in a domino effect.”
In response to these concerns, the cable industry is intensifying efforts to fortify the supply chain. The industry is implementing measures to decrease the proportion of short-term spot contracts, opting instead to increase the share of long-term agreements. This strategic move is aimed at ensuring a steady supply of raw materials and mitigating the risk of potential disruptions.
