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Now, let’s delve into the impact of a prolonged war on the supply of crude oil and naphtha, key materials for cable insulation.
The cable industry is currently experiencing a series of shocks due to the ongoing war in Iran. This has led to growing concerns that if the conflict continues, it could disrupt production for both cable manufacturers supplying cables for the national power grid and the Korea Electric Power Corporation (KEPCO), the main client.
On April 9, industry sources revealed that domestic cable companies had recently alerted KEPCO to potential instability in raw material supplies due to the war. The conflict has already destabilized the supply of crude oil and naphtha, which could in turn affect the procurement of insulation materials, key components for cable production.
Polyethylene (PE) and polyvinyl chloride (PVC), essential for the insulation and sheathing layers of cables, use naphtha as a primary feedstock. Cable manufacturers have currently secured enough inventory for about two months, avoiding immediate shutdowns. However, if the war continues, they will inevitably face reduced profitability and production volumes due to rising raw material costs.
Despite a temporary two-week ceasefire between the United States and Iran and the reopening of the Strait of Hormuz, market uncertainty remains high. The cable industry is particularly concerned that if logistics risks escalate, such as reduced operating rates at major petrochemical complexes inside Iran or rising transportation costs, there could be widespread disruptions to the national power grid expansion projects scheduled for the second half of the year.
KEPCO has officially begun designing the West Coast High Voltage Direct Current (HVDC) Energy Expressway project and is currently conducting large-scale cable manufacturing tenders. This project is a core initiative to transmit renewable energy from the west coast to the Seoul metropolitan area. Any delay in raw material procurement could directly undermine national energy security.
In response, the cable industry is accelerating efforts to strengthen its supply chain. Companies are working to reduce reliance on short-term spot contracts while increasing the proportion of long-term agreements (LTA) of one year or more to enhance supply stability.
In conclusion, the cable industry is taking proactive steps to mitigate the potential impact of the ongoing conflict in Iran on its supply chain. However, the situation remains fluid, and the industry will need to remain vigilant to navigate the challenges ahead.
