Top three international markets for South Korean contractors revealed

South Korea’s construction contractors received US$29.3 billion from overseas contracts in the 11 months from January to November 2023.

That’s according to new figures from the South Korean Ministry of Land, Infrastructure and Transport, revealed last week (15 December).

According to the International Contractors Association of Korea, countries in the Pacific and North America took up the largest share with 34.1% of orders (from January to November). This was nearly a 173% increase from last year’s figures.

The Middle East (30.2%), Asia (20.4%) and Europe (6.4%) rounded out the top four regions.

The US topped the list with most orders by country with US$9.45 billion during that period. Saudia Arabia ($6.48 billion) and Taiwan ($1.49 billion) were second and third, respectively.

An emerging market

The US at the forefront is a change for Korean builders. Historically, South Korea has had limited exposure to American construction markets. Following the US Inflation Reduction Act in 2022 – which allocated US$783 billion to address energy security and climate change, which includes infrastructure investment – Korean firms jumped at the opportunity to expand offerings in North America.

Hyundai Construction Equipment’s Ulsan Factory, South Korea

The US International Trade Administration (ITA) noted this could be a symbiotic relationship between the two countries.

“Korean conglomerates have announced significant investments in the US in critical industries such as semiconductors and EV batteries in recent years, prompting their construction arms to seek opportunities for additional US revenue,” stated the ITA.

“These Korean-led investment projects could yield opportunities for US companies in the construction/engineering and equipment sectors to assist with the local procurement needs.”

Added to it, the US was ranked number-one for the 11th consecutive year on Kearney’s Foreign Direct Investment Confident index, which ranks consumer confidence in countries outside their own.

One of the largest Korean-led deals on US soil is Samsung C&T’s roughly $5 billion order for Samsung Electronic’s semiconductor plant expansion project in Texas.

Considering all economic conditions, Korean builders increasing their presence overseas, particularly in North America, makes sense.

According to Construction Association of Korea and the Construction & Economy Research Institute of Korea, the country’s overall construction industry value is expected to dip 6.7% from 2022.

That reality paints a picture of construction orders down within Korean borders.

“The slowdown represents a larger trend resulting from the Bank of Korea’s efforts to tame inflation,” stated the ITA. “While inflation is easing, the government will likely maintain its current monetary policy, reducing construction on the peninsula.”

To offset diminishing orders within their own borders, Korean builders have increased their attention on overseas clients.

A major issue for diminishing returns on orders in Korea stems from material cost and inflation. According to Korea’s Producer Price Index (PPI), the average material cost increased 19% in 2021 and an additional 15% in 2022.

“Not all construction materials have been affected equally,” stated ITA. “The price of steel and metal rose by approximately 43% in 2021, and the cost of cement and ready-mixed concrete increased by 18% in 2022. Similarly, general construction costs, including labour costs, also increased by 3.8% in 2020, 14% in 2021, and 7% in 2022. Industry experts forecast this trend will continue in 2023.”

At a glance

Overall, South Korean overseas construction orders are up more than 7% from the same period last year.

With orders expected to surpass US$30 billion by year end, it will be the fourth consecutive year that Korean builders have secured at least that amount annually.

The Korean government has stated its intent of reaching US$35 billion in 2023, but final figures won’t be available until 2024. The government’s goal is to reach US$50 billion in annual overseas construction orders by 2027.