failure of compensation cable wiring insulation

That stuff looks to be seriously old. I probably wouldn't expect it to deteriorate like that without something else contributing though.

Brad Waybright

The more you know, the more you know you don't know.

It looks like the plasticizer cooked out. That will make the insulation brittle and cause it to shrink. If it cannot withstand the hoop stress, insulation chunks will break loose. Flexing the wire will cause the insulation to flake off. It may be most of the plasticizer left before installation and the insulation was stiff or the temp wasn't above the limit but remained elevated for a long time.

Check elsewhere outside the cabinet to see if it's just too hot in the cabinet or just bad wire overall.

The insulation is supposedly meant to be good for up to 150degC. I was reading elsewhere that moisture at the thermocouple junction remote end can affect insulation throughout the whole cable length? It was only a reference in passing though and no further references elsewhere saying same thing