[Exclusive] The 80 Billion Won 'Jackpot' Fades... Korean Companies Begin Packing Up from Saudi Neom City

Local Plant Operations Halted in January
Saudi Fiscal Woes Deepen Amid Falling Oil Prices
Delays Unavoidable for Korean Builders Like Samsung C&T
Skepticism Grows Over Riyadh Contract Prospects

Sungsin Cement, which had secured an 80 billion won contract for the Saudi Arabian Neom City project, has halted operations at its local plant and withdrawn from the site after just one year and six months. This move comes as the Saudi government’s fiscal conditions have significantly worsened due to falling oil prices and rising project costs, making it difficult to proceed with the project as planned. Analysts suggest this could signal a wave of withdrawals by other companies operating locally, such as Samsung C&T and Hyundai E&C.

A bird's-eye view of 'The Line,' the core of the Saudi Neom City project. Asia Economy DB

According to industry sources on May 20, Sungsin Cement stopped operations at its ready-mixed concrete plant in the Tabuk region of Saudi Arabia, which had been supplying the Neom City project, in January and partially withdrew its local workforce.

Neom City, one of the core projects of 'Saudi Vision 2030,' is centered on developing a 26,500 km² area (44 times the size of Seoul) near the Red Sea in northwestern Saudi Arabia into a low-carbon smart city. The project consists of three major components: 'The Line,' a 170 km linear city; 'Oxagon,' a high-tech industrial complex on the sea; and 'Trojena,' a mountain tourism complex. The total project cost amounts to $1 trillion (1,390 trillion won).

Sungsin Cement began its participation in the Neom City project in 2023 by establishing its Saudi subsidiary, Jinseong Industrial. After signing an 80 billion won construction contract with Samsung C&T, the company supplied ready-mixed concrete to the 'Running Tunnel (SNRT)' construction site, which is part of The Line within the Neom City project.

This followed the June 2022 contract awarded to the Samsung C&T and Hyundai E&C consortium for the Neom City Running Tunnel project, valued at $1 billion (1.39 trillion won). The Running Tunnel is a 28 km underground tunnel within The Line, which was planned to be used for high-speed and freight rail once completed.

However, recently, a combination of falling oil prices, worsening fiscal conditions at Saudi Arabia’s Public Investment Fund (PIF), a decline in foreign investment, and rising projected project costs has led to warning signs among Korean companies involved in the Neom City project. As the client’s ability to secure funding weakened, construction delays became more frequent, eventually bringing the project to a near standstill and disrupting the activities of Korean contractors. Ultimately, this resulted in Sungsin Cement, the only Korean company supplying ready-mixed concrete locally, suspending its business. However, Sungsin Cement plans to continue pursuing other contracts in Saudi Arabia beyond the Running Tunnel project.

An official from the International Contractors Association of Korea stated, "It is true that Neom City has entered a 'slowdown' (a situation where construction is delayed), and it seems unlikely to be completed as planned," adding, "Saudi Arabia, which is preparing for major sporting events such as the World Cup, has recently prioritized sports events over Neom City as a national priority, which is also a negative factor for the smooth progress of the Neom City project."

Domestic construction and cement companies are now turning their attention to Riyadh, Saudi Arabia, in search of additional contracts instead of Neom City. However, many voice concerns that even this will not proceed smoothly due to fiscal pressures and oil price volatility. Saudi Arabia is set to host major sporting events, including the 2029 Asian Winter Games, the 2030 Expo, and the 2034 World Cup. As a result, demand for overseas orders for local infrastructure and stadium construction is rising.

An industry insider commented, "There are certainly opportunities, but it is realistic to say that large-scale short-term contracts or stable profits are difficult to expect," adding, "Fiscal pressures and uncertainties still exist, so even if a contract is secured, there is a significant possibility of delays."

Amid these developments, the possibility of withdrawal by Samsung C&T and Hyundai E&C is now being seriously discussed. Since the Saudi government has not officially abandoned the project, the project itself is not being terminated. However, as normal construction has become difficult, it may be more reasonable for these companies to withdraw for now and reassess their participation based on future changes in the Saudi government’s stance or the regional situation in the Middle East.