Plant orders from Middle East fall off a cliff in 2012

Overseas orders to build industrial plants won by Korean companies dropped significantly in the first nine months of the year, with contracts from countries in the Middle East more than halving on-year, the government said yesterday.

Orders for industrial plants, including offshore and desalinization facilities, amounted to $37.4 billion in the January-September period, down 9.7 percent from the same period last year, according to the Ministry of Knowledge Economy.

The ministry partly attributed the drop to the global economic slowdown, which it said is making it difficult for those placing new orders to finance projects, forcing them to delay or even scrap their plans.

“The country’s builders continued to grab new orders for offshore plants in the third quarter, but the overall amount of new deals coming in from the Middle East shrank significantly due to difficulties financing projects,” it said in a press release.

In the September quarter alone, orders from the Middle East plunged over 51 percent on-year to $250 million, with the accumulated total in the January-September period also slumping 51.1 percent on-year to about $10.2 billion, according to the ministry.

Korean builders’ combined market share in the Middle East, previously their largest market, also dropped from 50.5 percent last year to 27.4 percent as of the end of September.

The ministry earlier forecast the country’s exports of industrial plants would continue to grow in the second half, following their 1.2 percent gain in the first half.

It has drastically changed its outlook, now saying it will, at best, be on par with last year’s figure.

“The amount of orders for offshore plants might exceed that of last year if the currently planned overseas projects stay on course,” the ministry said, acknowledging that Korean builders would still have to win a large number of those planned projects.

“In the case of onshore plants, the country is expected to win orders worth a similar amount as last year.”

With the second construction boom in the Middle East apparently on the wane, Korean builders are increasingly turning elsewhere in search of new revenue streams.

Orders for new industrial plants from Asian countries jumped 73.1 percent on-year to $11.8 billion in the January-September period, making Asia the world’s largest market for Korean builders.

Orders made from Asia was the largest as it accounted for more than 31 percent.

Orders from Africa more than quadrupled to $2.7 billion over the cited period from $537 million a year earlier.

Yonhap