Now Europe's subsea power cable giants cry foul over Asia threat

European suppliers of submarine cables are seeking measures to ward off what they see as unfair competition from Asian suppliers amid calls for the components to be recognised as critical infrastructure.

As recently as three years ago, subsea cables began to be seen as a potential constraint on European ambitions to grow the offshore wind sector tenfold by 2030.

In a study published last year, market intelligence firm Spinergie predicted that 27% of subsea cable supply contracts will go to Asian players in this peak 2028-30 period, describing a shortfall in European capacity as the driver.

These Chinese companies are beginning to compete head-to-head with European suppliers, however, and a wave of investment in European manufacturing capacity since 2022 has shifted the debate in a new direction.

The contract that probably did most to alert European cable suppliers that they may be in a dogfight was a package of orders for Baltica 2, a 1.5GW Polish offshore wind farm under development by Orsted and Warsaw-based PGE Group.

Poland’s Tele-Fonika Kable (TFK) — which owns JDR Cables in the UK — was in the running, but the contract to supply 170km of 66kV subsea array cables went to Ningbo Orient Cable (NBO).

Another contract, for 300km of 275kV marine export cables was split between China's ZTT and Hellenic Cables of Greece.

Among these, NBO is said to be pole position to provide a 220kV export cable system for the Mona and Morgan wind farms that BP and EnBW are currently developing in the UK North Sea, although this outcome has not been confirmed yet.

Europeans reject supply gap?

Europe's subsea cable manufacturers reject claims that Asian companies are needed to fill a capacity gap, and claim that Chinese companies are bidding significantly below what the Europeans see as cost price.

With over €4bn ($4.1bn) of investments announced in 2023-24 alone, the European sector expects to double production and installation capacities in Europe by 2030, according to industry association Europacable.

“European industry has sufficient capacity to deliver the cables needed to decarbonise Europe,” says Alberto Lampasona, Europacable’s senior director for public affairs.

In the HVDC arena, Prysmian, Nexans and NKT are all investing heavily in new facilities and vessels.

But investments are no less evident among companies more focused on array cables or HVAC export cables scaled for offshore wind farm developments.

JDR is trebling capacity for array and export cabling in the UK after investing £130m ($158m) on a new high voltage subsea cables factory in Blyth and is upgrading its Hartlepool facility.

In Greece, Hellenic Cable has expanded its subsea cable factory in Corinth to double production capacity, as well as boosting storage and upgrading port facilities.

NKT’s chief commercial officer Michael Hjorth describes Europe as “fundamentally self-sufficient in subsea export and array cables” with the potential to be an exporter, not an importer.

While acknowledging that demand peaks can cause delivery times to go up, he argues that this is a “temporary state” for a region that is leading the green transition, especially in offshore environments.

Strengthening grid systems to accommodate electricity flows from new offshore sources has created extra demand, he admits, but Hjorth claims the European cable industry “has been very mature and disciplined” in its response.

NKT’s own investments will turn its submarine cable factory at Karlskrona, Sweden, into the world's largest production site for high voltage offshore cables. A 200-metre extrusion tower there is capable of producing power cables of up to 640kV, and the Danish company is also expanding a factory in Germany.

With an €18bn backlog, market leader Prysmian is doubling production capacity at its factories in Pikkala (Finland), Pozzuoli (Italy) and Gron (France) and has a ninth cable-laying vessel under construction.

Responding to a temporary "overhang" by importing from other parts of the world will disturb the supply demand balance for companies investing in anticipation of demand 30 years from now, Hjorth says.

Superhighway contenders

Major offshore grid expansion projects by transmission system operators such as TenneT (Netherlands and Germany) and Amprion (Germany), have served to established the 525kV standard for subsea cables forming part of Europe's emerging HVDC electricity "superhighway".

Billions of dollars worth of orders under framework agreements have provided market leaders NKT, Nexans and Prysmian with an powerful investment stimulus in these extra-high voltage cables, and more vessels.

So far Japan’s Sumitomo Electric and Korea’s LS Cable & System are the only Asian companies to have qualified to supply these 525kV cables in Europe —the Korean cables giant participated in a consortium that won a $1.5bn TenneT contract to provide three North Sea wind farms with an HVDC connection to the German grid.

Chinese cable companies are already deploying their own HVDC standards at home, with voltage specifications converging around 535kV, but none of them have yet qualified to supply 525kV subsea cables in Europe.

But even on these strategic TSO projects, the Chinese suppliers have been playing an important role in supplying high voltage transmission cables.

Partnerships and pacts

For the time being, it is the market for array cables and near-shore export cables that is providing the battleground between Chinese and European cable makers, and many of the latter are fearful about a “race to the bottom”.

“Ours is an open market, but to secure the future of European manufacturing, we need to make sure that everybody is competing on a level playing field,” Lampasona says.

“We are against the idea of having subsidised non-European companies entering the market and using this advantage to put cheaper options on the table. This is unfair from our perspective.”

NKT's Hjorth says he welcomes competition as a driving force for the development of technology and providing value to clients and consumers, but then he lets rip.

“With European industry's technological advantage and project competencies, we can be competitive… but we are extremely focused on that competition being on fair terms and in compliance with EU and local regulations,” he says.

“We find it peculiar when we encounter competitors who are allowed to sell their products into the European market, apparently in compliance, but at prices significantly lower than what we consider to be the fair market value of same type of products.

“When you add things up you see a pattern that is more about taking market share and creating a relation of dependency than competing on the basis of a sustainable industry.”

Will the EU take action?

The EU Commission is expected to unveil its new EU clean industrial deal next month and EuropaCable has been pushing for more effective protection from unfair competition.

Investigation under the FSR is expected to address industry accusations that state-supported Chinese companies are able to operate their factories at levels of utilisation than would be unsustainable for Western companies and bid far below European cost levels.

Europacable has already engaged in a similar battle over alleged Chinese overcapacity for optical fiber cables, resulting in an 88% anti-dumping duty.

“Our objective is to have non-European manufacturing companies competing on level playing field. Otherwise, in a few years, we will be talking about the cable industries as we are discussing now about solar, and facing the challenging of trying to rebuild production in Europe,” Lampasona says.

Chinese response

Chinese trade bodies have urged the EU “to rectify its improper measures under the FSR, ensuring a fair, just, and non-discriminatory business environment for Chinese enterprises operating in the EU”.

The EU’s Net Zero Industry Act (NZIA) requires sustainability criteria to be adopted for public procurement tenders and renewables auctions by March, and Europacable also sees this as a potential game changer.

“The industry has been investing a lot in decarbonising Europe... let's make sure that these non-price criteria are used and accounted for in tendering processes,” Lampasona says.

Hjorth argues that the environmental, governance and social aspect of such tenders should be at least 30% of the evaluation, to make sure that pricing factors do not dominate.

James Young , chief strategy and compliance officer of Tele-Fonica Cables subsidiary JDR Cable Systems says transport emissions should be taken into account when shipping infrastructure components to a region that has its own manufacturing capacity.

“The ultimate aim is to try and get costs down. But lets do it in a sustainable way.”

Resilience and security

Europacable also wants to see resilience criteria applied to the subsea cables sector, with EU recognition of grids as critical infrastructure clearly extended to components such as cables.

“I think energy has come back right at the top of the agenda of national security. We see the EU starting to be more vocal around critical infrastructure and how to protect that,” says Hjorth.

The debate is often framed in terms of dependency.

“If we want to secure and protect our infrastructure we also need to secure European manufacturing. We don't want to become dependent on others for the supply of critical assets to Europe,” Lampasona says.

The resilience argument can feed directly into discussions about local content.

"Localising content is the only way we can supervise and protect the products that are installed within the critical infrastructure," claims Bartlomiej Zgryzek, vice-president of Tele-Fonika Cable.

While TSOs deal with critical grid infrastructure, there is some recognition of the pressures that offshore wind developers can face as they seek shareholder returns on a project-by-project basis.

Europacable also wants to see some anomalies in the EU’s carbon border adjustment mechanism (CBAM) addressed the legislation comes into force in 2026.

“For the time being, CBAM covers aluminum, but not aluminum power cables,” says Lampasona.

“We could have situation in which a European manufacturer purchasing aluminum from outside Europe faces higher costs than non- European producers fabricating these power cables and importing them from abroad.”

Danger of overprotection?

Some offshore wind developers quietly point out the dangers of overprotection.

"Bottlenecks, as we know, send prices upwards. You have to question if we should exclude China if we want to achieve the offshore wind buildout at accelerated speed,” a manager with one developer commented, on condition of anonymity.

But European suppliers see a slippery slope, once developers begin to turn to Chinese suppliers on price.

"Of course there should be continued competition, that's absolutely essential to create value for the end-consumer, but it should not be solely about price,” says Young.

Partnering up

Spinergie’s offshore energy analyst manager Jean-Baptiste Rouegeot reckons that contractual logistics have also played a role in drawing Asian suppliers into European markets.

He traces this tend to the use of turnkey EPCI contracts covering engineering, procurement, construction and installation as developers sought to manage their own supply chain risks.

While vessel-owning cable manufacturers like Nexans, NKT and Prysmian are comfortable in EPCI mode, European T&I specialists found themselves short of options, he notes.

“There were not enough partners available for the T&I companies in Europe so they looked East to find manufacturers able to produce cables for their vessels to install,” Rouegeot says.

Among the European T&I companies, Belgium's Jan de Nul and its Dutch rival Van Oord have both partnered with LS Cable & System for subsea cable turnkey contracts, Boskalis has partnered with DBO and SSO Subsea has linked up with ZTT

Some of the more integrated European suppliers of submarine cables, with their fleets of vessels, rich project management experience and huge contractual backlogs, can sound relatively sanguine about any such Asian threat.

"When it comes to EPCI for submarine cables the handling and installation part is a source of risk… If I were a customer, I would not want an interface between a manufacturer and an installation company,” comments Nexans executive vice president for generation & transmission, Pascal Radue.

“This whole operation is logistically extremely complex, and there is a constant optimisation going on between the factories and the ships. We have invested a lot in this.”