Rising construction costs are reshaping the mood across South Korea’s building sector. With higher raw material and labor costs persisting, contractors are repeatedly revising previously disclosed single sales-and-supply contract amounts, a sign that cost pressures at job sites are becoming harder to absorb.
Samsung C&T, Hyundai Engineering & Construction and Daewoo Engineering & Construction have raised contract amounts by more than 1 trillion won combined so far this year.
On April 24, the construction industry said Samsung C&T on April 22 filed a revised disclosure increasing the contract value for “PROJECT LIGHTNING” — a high-voltage direct current transmission project in the United Arab Emirates — to 2.8764 trillion won from 2.7693 trillion won, an increase of 107.1 billion won. The project includes installing power conversion and substation facilities in the UAE and supplying subsea HVDC cables.
Separately, the main equipment construction cost for Shin Hanul nuclear power units 3 and 4 rose by 85.9 billion won, to 1.2959 trillion won from 1.21 trillion won.
Hyundai E&C has also raised contract amounts in April for projects including the Daejang-Hongdae metropolitan rail private investment project, the Jafurah utility project in Saudi Arabia, and the reconstruction of Banpo Jugong Apartment Complex 1, zones 1, 2 and 4. Based on related disclosures, the total increase is about 446.2 billion won.
The Daejang-Hongdae rail project alone grew from 868.864 billion won when first disclosed in June last year to about 1.1097 trillion won in the latest revision. The increases span urban redevelopment, rail and overseas sites, indicating the cost burden is not limited to one type of project.
Daewoo E&C reported similar revisions, adjusting contract amounts for projects including the Jangwi District 10 redevelopment, the GTX-A line private investment project, the Heukseok District 11 redevelopment and the Cheongju Technopolis development work. The total increase is estimated at about 681.2 billion won, including about 252.2 billion won for the Heukseok District 11 redevelopment.
Together, the three builders’ increases total 1.3204 trillion won.
The trend is not limited to the largest firms. Mid-sized builders such as Hanshin Engineering & Construction and Dongbu Construction have also filed revised disclosures for single sales-and-supply contracts. The pressure to recalculate costs is spreading beyond redevelopment and reconstruction to civil engineering and plant projects.
Among 12 listed builders ranked in the top 50 by construction capability assessment, contract increases over the past two months totaled 2.4290 trillion won.
An industry official said costs at many sites have risen to levels where it is difficult to protect profitability based on the original contract amount. “At sites where disputes over construction costs have dragged on, cases are not rare where this leads to delayed starts, work stoppages, or renegotiations between contractors and associations,” the official said.
The market expects the upward pressure on construction costs to persist because material and labor costs remain unstable. According to the Korea Construction Industry Research Institute, the construction cost index in February stood at 133.69, up 2.0% from a year earlier. The institute attributed the rise to higher prices for other metal products, automatic adjustment and control devices, and primary steel products.
Uncertainty has also increased for key process costs, including chemical-related materials, amid geopolitical risks in the Middle East, energy price swings and transportation cost burdens. As time passes after groundbreaking, cost changes accumulate, and projects that can no longer absorb them internally move to revise contract amounts.
Even so, higher contract amounts do not necessarily translate into a quick recovery in profitability. In many cases, only part of the increase is reflected through negotiations with project owners, and longer construction periods can create additional burdens.
A construction company official said that even with partial increases, it is difficult to fully recoup surging material and labor costs as well as higher financing costs. “Contract amounts have risen on paper, but it is hard to say profitability will recover,” the official said.
* This article has been translated by AI.
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