South Korea's Overseas Construction Orders Halve in First Half as Middle East Slump Hits

South Korea’s overseas construction orders fell 64% in the first half from a year earlier, hit by the fallout from the U.S.-Iran war and other geopolitical tensions. Orders are expected to continue in developed markets such as the U.S. in the second half, supported by energy projects and factory construction by affiliates of Korean conglomerates.

Data released July 21 by the International Contractors Association of Korea showed overseas construction orders totaled $11.28106 billion in January through June. A total of 243 companies won 286 contracts in 78 countries. That compared with $31.01335 billion a year earlier.

The overall decline was driven by sharp drops in the Middle East and Europe. Orders from the Middle East, a traditional stronghold for Korean builders, fell 77.2% to $1.27179 billion in the first half from $5.57483 billion a year earlier. In Europe, orders plunged 97.9% to $408.22 million from $19.68278 billion.

The Middle East market contracted rapidly after the U.S.-Iran war broke out in late February. Individual plant projects in the region are typically large enough to have a significant effect on overall orders, an association official said.

The drop in European orders reflected a base effect from last year’s award of the Dukovany nuclear power plant project in the Czech Republic. That contract was worth $18.72 billion.

The Pacific and North American regions helped cushion the decline. Orders there rose to $7.24567 billion in the first half from $2.73401 billion a year earlier. The increase was driven by the $2.88 billion engineering, procurement and construction contract for the Delfin floating liquefied natural gas production facility in Louisiana, as well as local factory construction by affiliates of groups including Samsung and Hyundai Motor. Orders in Asia were little changed at $1.93189 billion, compared with $2.09017 billion a year earlier.

By segment, industrial facilities, including plants, accounted for 75.1% of total orders at $8.47414 billion. Building construction totaled $1.5313 billion, while civil engineering projects reached $479.46 million.

Prolonged military tensions in the Middle East may make it difficult to match annual levels seen in recent years. Overseas construction orders have hovered around $30 billion a year over the past five years. Last year, they rose to about $47 billion, helped by nuclear power plant deals.

Lee Yoo-jung, Hankyung.com reporter yjlee@hankyung.com