If sanctions end, Korea intends to profit in Iran

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If sanctions end, Korea intends to profit in Iran

Shares in Korean construction companies received a large boost from news of a nuclear deal with Iran, with rising expectations that economic sanctions will be lifted and Korea will share the fruits of a construction boom in the country.

Iran was one of the largest construction markets in the Middle East before the sanctions. Daelim Industrial, Hyundai E&C and GS E&C used to be involved in plant construction projects there in the early 2000s.

The three companies’ shares started rising as soon as the stock market opened, maintaining nearly 3 percent rises through the day. Then they closed even higher. GS E&C jumped 6.07 percent to close at 31,450 won ($28.8). Hyundai E&C saw a 3.25 percent rise to close at 50,800 won. Daelim Industrial rose 4.06 percent to 66,700 won.

Other builders that have construction experience in the Middle East, if not Iran, also got a boost from the news. Hyundai Development Company, which has done refinery and infrastructure projects in Saudi Arabia, rose 3.62 percent to 57,300 won. Daewoo E&C, which has experience building chemicals plants in Qatar and Saudi Arabia, went up 2.7 percent to 8,000 won. Samsung C&T, which last year completed building a thermal power plant in Saudi Arabia, edged up 0.53 percent to close at 57,400 won.

According to the International Contractors Association of Korea, the Iranian construction market is estimated to reach up to $154.4 billion in 2016, almost double the size of 2013’s $88.7 billion.

Analysts said an end to economic sanctions on Iran will bring business to Korea.

“Before the economic sanctions began in 2009, the years 2002 to 2006 were the busiest time for Korean builders in Iran, mostly in the gas fields of the South Pars region,” said Park Hyung-ryul, senior researcher at KDB Daewoo Securities. “Korean builders will be exposed to business opportunities in maintenance and extensions of existing plants.

“Other areas that Iran may need work on would be infrastructure and power plants as foreigners come in and business transactions revitalize,” added Park. “If the Iranian government eases financial regulations, Korean builders that previously had business networks will definitely have more opportunities. The Korean construction industry still has price competitiveness, especially considering its technical level.”

The Korea International Trade Association on Friday afternoon issued a statement that welcomed the Iran deal, saying it will boost Iran’s demand for value-added products from Korea.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]
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