Domestic Construction Companies "Closely Monitoring Local Conditions"
Alert to Rising Raw Material Prices and Interest Rate Fluctuations
The war between Israel and the Palestinian armed group Hamas has emerged as a variable in overseas construction orders, which had been progressing smoothly until the third quarter of this year. Construction companies are watching the situation closely amid tensions, including the possibility of the conflict spreading throughout the Middle East. Concerns have also been raised that achieving this year's target of $35 billion in orders may be disrupted.
According to the Overseas Construction Comprehensive Information Service on the 12th, the cumulative overseas construction orders for the first three quarters (January to September) of this year amounted to $23.53138 billion, an increase of about 5% compared to the same period last year ($22.41905 billion).
Looking at the monthly cumulative order amounts, orders were below last year's level until May, but in June, they recorded $17.2914 billion, surpassing the previous year's performance for the same period. In August, the cumulative orders exceeded $20 billion for the first time since 2018, and the momentum has continued through September.
The driving force behind the order performance was Hyundai Construction, which in June secured a $5 billion petrochemical complex project from Saudi Arabia's state-owned oil company Aramco. Thanks to this, orders in the Middle East region reached $7.9851 billion as of the end of September, exceeding last year's performance by 20.4%.
Growth in the Pacific, North America, and Latin America regions is also notable. Orders through the third quarter of this year amounted to $7.42252 billion and $1.33779 billion respectively, already surpassing last year's results. Given this trend, it was expected that this year would comfortably exceed $30 billion.
However, recent armed clashes between Israel and Hamas in the Gaza Strip have destabilized the Middle East situation, raising concerns that the conflict could spill over into Saudi Arabia and Iraq, where domestic construction companies are active. In particular, since both the public and private sectors have been heavily invested in securing the astronomically valued Saudi NEOM project, the impact of the war is inevitably sensitive.
Hyundai Construction is aiming to secure the NEOM City tunnel project, the second phase of the Jafurah gas field, and the Safaniya gas field project in Saudi Arabia in the second half of the year. In Iraq, Daewoo Construction is carrying out the Al Faw port development project and has secured follow-up contracts. Additionally, Samsung C&T, Samsung Engineering, and Hanwha Corporation's construction division have also entered the Middle East market.
Although there has been no direct damage yet, construction companies share a common response of closely monitoring the local situation and prioritizing the safety of employees dispatched to the Middle East. A representative from Company A stated, "Geopolitical risks and other variables have often existed in overseas construction projects, and domestic construction companies have dealt with them wisely. We need to observe whether existing projects and future orders will be delayed."
Rising raw material prices and interest rate fluctuations are also cited as concerns, as they could make financing conditions in the construction industry more difficult. A representative from Company B said, "If the war prolongs, raw material prices may rise, and it is important whether inflation will delay interest rate cuts or rather increase pressure for hikes. However, we believe the impact will be less severe than Russia's invasion of Ukraine."
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