South Korean builders are likely to fall short of their annual overseas order targets this year, analysts said Sunday, amid concerns over a slowdown in the global economy sparked by the U.S.-China trade dispute.
As of the end of October, South Korean construction companies amassed $17.68 billion worth of overseas orders, down 27 percent from a year earlier, according to data from the International Contractors Association of Korea (ICAK).
For 2019, South Korean builders have targeted a combined US$35 billion worth of overseas orders, meaning they have so far only achieved half of their annual target with only two months left on the calendar.
Decreased orders from the Middle East, which has traditionally been a cash cow for local builders, and Asia have led the decline. South Koreans secured construction orders worth $4.3 billion in the Middle East as of end-October, compared with $8.5 billion a year ago. In Asia, local companies secured $10.4 billion worth of orders, down 19 percent from a year earlier.
Market observers blame the protracted U.S.-China trade war, which has been weighing on the global economy.
"Although major builders recently secured orders from foreign countries, it's still not enough to say that overseas orders are in a full recovery phase," said Baek Kwang-je, an analyst at Kyobo Securities Co. "But it's positive that local builders are getting various types of projects."
Decreased orders will affect construction companies' sales in the next two years or so. Major builders like Daewoo Engineering & Construction Co. and GS Engineering & Construction Co. reported that their third-quarter sales dropped more than 20 percent.
"Since 2004, most builders haven't had overseas orders like in previous years and their sales have been declining," said Song Yu-rim, an analyst at Hanwha Investment & Securities Co. "On the positive side, it means they'll have less chances of seeing big losses overseas, but an excessive decrease in orders can lead to concerns over fixed costs."
But market watchers said the recent slump in overseas orders doesn't mean local builders are losing their competitiveness in the global market.
"Bidding results of some construction projects will come out at the end of this year, or early next year, so there are still expectations that local builders can make a rebound," said Ra Jin-sung, an analyst at Kiwoom Securities Co. "Unlike in the past, local builders now go for the high-value projects that they can do best. They have also improved their design and site management capabilities, so that's a positive factor." (Yonhap)