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For construction companies, good news from abroad

Published: 27 Nov. 2013, 22:16

Local construction companies struggling at home are receiving good news from one overseas market after another. On Monday alone, three companies announced deals for overseas contracts worth $2.34 billion. Daelim Industrial, Daewoo Engineering and Construction, and Posco Engineering and Construction each received big orders from Oman, Iraq and Brazil in plant and infrastructure building.

Daelim Industrial obtained an oil refinery factory expansion project in Sohar, about 230 kilometers (143 miles) northwest of Oman’s capital of Muscat. The $2.1 billion project is being handled by the country’s oil office, and aims to expand an existing refinery and build a new one where crude oil is refined to produce naphtha, gasoline and diesel. Daelim leads the project in cooperation with U.K.-based oil service company Petrofac. Daelim said it expects about $1.05 billion in profit from the project. While Daelim takes charge of building factories, Petrofac mainly concentrates on repairing existing plants and building business-support facilities.

Daewoo Engineering and Construction received an order worth $693.33 million to build a seawall in Basra, southern Iraq. It is part of the new port-building project on the al-Faw Peninsula led by the country’s maritime and port office. The project is to build a riprap seawall as long as 15.85 kilometers, including work such as dredging, supply and installment of ripraps and stones that protect them, and finally placement of cap concrete.

Posco Engineering and Construction expects $600 million in profit from a steel manufacturing plant construction project in Brazil. The facility is expected to produce 800,000 tons of metal sheets every year for CSS Corporation. With the Brazilian company, Posco previously won contracts to build facilities involved with earlier parts of the steelmaking process.

And this time Posco grabbed a chance to build facilities for the later stages in the manufacturing process, such as installing hot and cold steel-rolling machines and other supporting facilities.

The construction industry is getting a larger volume of new projects recently because previous projects in the past are being completed.

“It usually takes six to 12 months until the winner is announced. But this time of the year is full of announcements as the year’s end approaches. The ordering parties recently have rushed the screening process,” said Kang Dong-hwan, manager of the overseas business team at Daewoo Engineering and Construction.

As the domestic real estate market has been staying sluggish, exploring overseas construction markets is emerging as a new way out of frigid industry conditions.

There are almost no business possibilities in the local construction market due to a stalled housing market and shrunken investment in social overhead capital, such as public works and services.

Meanwhile, overseas markets are feeding Korea’s project-starved companies.

According to the International Constructors Association of Korea, net orders received abroad were $53.3 billion this year as of Tuesday, 14 times larger than in 2003. The cumulative value of overseas orders since 1965 is $600 billion.

The nationalities of clients also are becoming more diverse due to heated competition among local construction companies. The Middle East used to be the largest targeted market, but more builders are now turning their eyes to Asia and South America. For Daelim, the latest contract is the company’s first in Oman.

Posco is looking into new markets in Southeast Asia and Central and South America, including Vietnam, Chile and Brazil.

“Overseas projects already emerged as the future growth engine in the industry. We will keep paying attention to foreign markets for more business opportunities, not staying satisfied with a single project,” said Jeong Dong-hwa, vice chairman of Posco E&C.

BY CHOI HYUN-JOO [[email protected]]