▲Israeli air defense system in action in response to Iranian drone and missile attacks on the 14th (local time). (Reuters/Yonhap News)
Although the domestic construction industry is focused on receiving foreign orders, the outlook for receiving orders is futile. Due to the deterioration of the domestic housing market, not only large companies but also medium-sized companies turn to overseas to generate profits, but the environment for receiving orders worsens. Looking at the first quarter of this year alone, the number of foreign orders reached the lowest level in five years. In addition, geopolitical risks are growing, with armed conflicts intensifying in the Middle East, the main source of orders.
According to the Overseas Construction Association on the 21st, foreign construction orders in the first quarter of this year reached $5.52 billion, the lowest level in the past four years. This is a decrease of 9.6% since the same period last year. The amount of orders received in the first quarter over the last five years is $11.2 billion in 2020, $8 billion in 2021, $6.6 billion in 2022, and $6.1 billion in 2023.
Regarding the order trend in the first quarter, the Overseas Construction Association said, “Despite low growth and uncertainty in the international economy, international oil prices remained high and orders were won for Saudi and Qatari industrial facilities (USD 1.8 billion) and USA battery plants (USD 1.3 billion). explained.
Looking at the details of overseas orders in the first quarter, there are concerns that the quality will decline. In fact, in the first quarter, the concentration of orders in the Middle East and the monopoly of orders by certain companies increased.
According to the ‘Top 10 Order Receiving Companies’ analysis, in the first quarter of this year, Hyundai Engineering received approximately $2.922 billion, accounting for 52.7%, or more than half, of the total order. HD Hyundai Heavy Industries followed with $1.147 billion, accounting for 20.8% of the total. The total share of the top 10 companies was $4.62 billion, or 83.7% of total orders.
On the other hand, in the first quarter of last year, the total share of companies ranked 1st to 10th was only 7.4%. Even on a cumulative basis after collecting statistics on overseas orders, the proportion of orders received by the top 10 companies was found to be around 35%. Even compared to the cumulative average, in the first quarter of this year, the phenomenon of a small number of companies canceling orders was particularly serious.
In addition, as the share of orders from the Middle East continues to expand, geopolitical risks also increase. The amount of orders received from the Middle East in the first quarter was approximately $ 2.4 billion, or 43.6% of the total, which is more than double the 20.4% ($ 1.244 billion) received in the first quarter of last year. On the other hand, the share of orders decreased in all regions except Central and South America (1.4% → 2.4%).
The $7.2 billion ‘Fadili Gas Expansion Program’ that Samsung E&A and GS E&C received from Saudi Arabia early this month is also positive as it is a large-scale order, but has the limitation that all orders have u receive from one place only. Saudi Arabia.
In particular, Israel launched a missile attack on Iranian military facilities on the 18th (local time), raising the possibility of an all-out war in the Middle East. Israel is increasing its offensive in retaliation for an Iranian missile attack on its mainland. If the atmosphere of war spreads in the Middle East, it may become more difficult for domestic companies to receive orders.
A construction industry official said, “In fact, it is difficult for domestic companies to win orders directly from the US or Europe, so they are competitive in the Middle East and Asia. “In particular, we have no choice but to focus on receiving orders from the Middle East as development plans are pouring in due to the recent trend of high oil prices,” he said “We are keeping a close eye on the armed conflict situation in the Middle East.”
As the outlook for foreign orders for domestic companies concentrated in the Middle East becomes uncertain, large as well as medium-sized companies are more likely to face difficulties in their current business plans to expand orders abroad this year. Kim Hwarang, an associate research fellow at the Construction Industry Research Institute, said in a related report on the 12th, “This year, large medium-sized construction companies are expected to pursue foreign market entry by participating in related projects based on stable financial resources. such as Korea’s Official Development Assistance (ODA) due to the economic downturn domestic construction “It has been calculated,” he said.
However, some say that if the conflict in the Middle East ends in a local war, there will be no major problems in the prospects of domestic companies receiving orders. Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, said, “It is unlikely that Iran will block the Strait of Hormuz, the Middle East’s oil export route, or start an all-out war because of the conflict in the Middle East, so it is orders from domestic companies are unlikely to be blocked. “
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