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How Can Korean Construction Companies Improve Global Competitiveness by 2025?

23 Dec 2024 8min 9sec

■ Overseas orders exceed 30 billion USD for five consecutive years - will 2025 be a rosy year?


According to the International Contractors Association of Korea(ICAK), the total number of overseas orders secured by Korean construction companies this year stands at 525, with a cumulative value of 32.69 billion USD as of the end of November. This represents an increase of 18% over the same period last year (27.73 billion USD and is also 32.5% higher than the five-year average of approximately 24.82 billion USD Despite challenges such as high inflation, high interest rates and high exchange rates, South Korea's construction industry has achieved more than 30 billion USD in overseas orders for five consecutive years. However, concerns remain due to rapidly changing domestic and international conditions, raising questions about how long this upward trend can be sustained.


Global Construction Market Size - Growth Trends and Outlook 2025 Construction Market Outlook by Region (Market Size: 100 million USD, Growth Rate: %) (100 million USD) 160,000 156,361 (%) 14.0 150,000 146,803 142,271 140,000 136,988 131,394 130,000 117421 120,000 115,834 THE960 107,507 100,621 10 90,000 80,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Market Size Growth 80 Asia Europe North America & Pacific 3.80 treion dollars 7:01 trilion dollars 73% 3.05 trillion dollars 40 325 Middle East 749.2 billion dollars Africa 116.5 billion dollan Latin 80% 806.3 billion dolars 4 -6.0 Total 156.161 billion USD, 6.4% growth source: IHS Markit


According to IHS Markit (Oct 2024), a global market intelligence company, the global construction market is expected to reach 15.62 trillion USD in 2025, an increase of 6.4% from this year. The market is expected to continue growing, driven by factors such as public infrastructure investment policies implemented by various countries. The Middle East remains the only region with double-digit growth (11.8%), driven by its oil money. Africa, which has been sluggish due to the global high-interest rate environment, is also expected to grow by 9.9%. In addition, large projects focused on transportation infrastructure are expected to thrive in Asia, while Europe is expected to see growth in the green energy sector. In Latin America, projects to upgrade aging infrastructure are expected to gain momentum.



[ Hyundai E&C's construction site for the Oumache 3 combined-cycle power plant project in Algeria, North Africa ]

Despite the market's optimistic outlook for the global construction industry, the hurdles that Korean construction companies need to overcome are not insignificant. Factors that could hinder growth include rising overall construction costs due to rising labor, material and logistics costs, as well as unstable geopolitical risks and political situations. The increase in orders for investment development projects, which involve investment rather than simple contracts, also adds to builders' concerns. This is because government investment capacity in the construction market has not kept pace with demand as government debt levels around the world have skyrocketed since the pandemic. Over the past five years, the share of overseas investment development orders for Korean construction companies has remained at around 5%, which is not yet at a full-fledged level. So, what industries should Korean companies focus on to break into the overseas market? Let's look at the markets for ▲green energy ▲nuclear power ▲oil and gas ▲con-tech.


■ The Environmentally Friendly Energy Market to Gain from Increased Government Investments


Key Projections for the Power Sector as Per Net Zero Energy Scenario Renewable Energy (thousand GW) Power Grid Investment (Billion USD 2022, MER) Fossil Fuel-based Power Generation (thousand TWh) Nuclear Energy (GW) 30 1200 10 TE 900 20 800 12 600 2022 2030 2040 2050 400 2022 2030 2040 2050 2022 2030 2040 2050 Co 300 2022 2030 2040 2050 source: International Energy Agency


The most significant change in energy policy is expected to take place in the US. Despite the possibility of a sudden reversal of environmental policy under "Trumponomics 2.0”, the global energy transition is projected to continue next year. According to a study by the International Energy Agency (IEA), global electricity generation from renewable energy will triple by 2030, while investment in power grids will double. Meanwhile, power generation from fossil fuels is expected to decline by 95% by 2040 and be gradually phased out. This is why many expert organizations predict that Trump's policies are unlikely to alter the global energy transition trend.



[ Ivanpah Solar Power Plant, the world's largest solar thermal power station, located near Primm, Nevada, US. (Getty Images Korea) ]

Investment in green energy by various countries is accelerating. According to the IEA, global government investment in the green energy sector will total 1.34 trillion USD as of April 2020, a ninefold increase from 2010. However, with 1.25 trillion USD or 93% of the total, coming from developed countries, green energy investment may become increasingly polarized. In particular, as tax credits and subsidies related to green energy continue to expand, particularly in the EU and Japan, a favorable environment is expected to emerge to ensure project profitability. 

Government Support for Clean Energy Investments Introduced After the COVID-19 Crisis Low carbon electricity 310 billion dollars Mass and atamative transit 307 billion dollars efficient buktings and Industry 264 billion dollars Pustant technology innovation 182 billion dollars Low cartion vehicle 120 billion dollars Electricity netwoRS 86 billion dollars source: International Energy Agency (as of June 2023)

The largest share of sector-specific investment is projected to go toward low-carbon energy sources such as nuclear, solar, and wind, with an estimated 310 billion USD. This is followed by mass and alternative transit sectors at 307 billion USD and energy-efficient buildings and industry at 264 billion USD. Moreover, as government investments are also anticipated in areas such as fuel and technology innovation, low-carbon vehicles, and electricity networks, business opportunities in these sectors should be closely monitored.


■ Global Nuclear Power Market Back in the Spotlight



[ Indian Point Nuclear Power Plant in the US, where Hyundai E&C is collaborating with Holtec International on a nuclear decommissioning project, the first such initiative by a Korean builder ]


The nuclear power plant industry, where Korean builders have a competitive edge, is expected to expand further next year. As nuclear power gains attention as an alternative solution to power shortages caused by the explosive growth of the digital industry and the energy transition, demand is expected to increase in many countries. Currently, reactors over 30 years old account for 66% of the world's nuclear power generation, which is likely to accelerate various related businesses, including construction of new nuclear power plants, life extension of existing plants, decommissioning of old reactors, and development of spent nuclear fuel facilities.


Global Nuclear Power Plants and Country-Specific Status Global Nuclear Power Generation (Unit: TWh) 5,497 Reactors in Operation 33Countries 439Reactors 395GW Reactors Under Construction 18Countries 58Reactors 60GW Country Nuclear Power Capacity US 92Reactors (95GW) France 56Reactors (61GW) 55Reactors (52GW) China Russia 37Reactors (28GW) Latin America 25Reactors (24GW) Nuclear power generation is expected to Increase 2x or higher from 2,698 TWh in 2020 to 5,497 TWh in 2050 4,855 3,777 2,698 20 30 40 50 source: Korea Energy Economics Institute (KEET source: International Energy Agency

The IEA forecasts that global nuclear power generation will more than double from 2,698 TWh in 2020 to 5,497 TWh in 2050. Korea has already achieved tangible results, including Hyundai E&C's Kozloduy project in Bulgaria and Team Korea's Dukovany project in the Czech Republic. Looking ahead, significant business opportunities are expected in countries such as Poland, India, Türkiye, the UK, Romania and Indonesia. However, there is growing concern that the nuclear power plant business remains heavily G2G (government-to-government), creating uncertainties that could weaken competitiveness in securing orders. However, if Korean companies actively pursue projects based on successful examples such as the Barakah nuclear power plant in the UAE, further contract wins are likely. In addition, with major companies such as Holtec International and Nuscale Power establishing strong collaborative systems with Korean construction firms, progress is expected next year in the Small Modular Reactor (SMR) sector, which is gaining attention as the next generation nuclear power reactor.


■ The Oil & Gas Market Poised for Its Largest Expansion Ever


Global Oil & Gas Project Sector Poised for Its Largest Market Expansion (Unit: 100 Million USD) (Market Size: 100 Million USD, Growth Rate: %) 3,932 3,097 4,470 Country 2024 Market Size 2028 Market Size Annual Growth Rate Share Asia-Pacific 1,018 1,251 5.3 25 Middle East Africa 582 711 5.1 4.4 15 11 3,147 9 Europe Latin America 432 347 514 325 -1.6 0.8 40 14 20 Ram 24 28 North America Total 1,619 3,997 1,669 4,470 2.8 100 source: Globaldata

The oil and gas market, which was severely impacted during the COVID-19 pandemic, is expected to regain momentum next year. According to market research firm GlobalData, global oil and gas projects reached a record high of 399.7 billion USD this year, surpassing the previous high of 393.2 billion USD in 2014. There are even predictions that the market could grow to 447 billion USD by 2028.


Regionally, the Asia-Pacific and Middle East-Africa markets are expected to drive growth with an average annual growth rate of 5%. The US, which has already secured the largest market with its active LNG business, is also expected to maintain its strong position in the oil and gas sector. During the election campaign, President-elect Trump repeatedly emphasized "Drill, baby, drill," reaffirming his strong commitment to loosening regulations on oil and gas production while increasing support for the fossil fuel industry. This policy shift is likely to boost oil production in the short term, but it could also affect the production plans of major oil producing and exporting countries, including OPEC, so it is important to keep a close eye on the international crude oil market.



■ The Con-Tech Market Driving Profitability in Construction Sites


The construction industry is often considered unprofitable due to its dispersed risks and high sensitivity to external environmental factors. According to global consulting firm McKinsey, the construction industry's profit margin is 4.4%, ranking 15th out of 17 industries, including manufacturing and IT. To address these challenges, many construction companies are looking to improve profitability and labor productivity, with intelligent construction technology seen as one of the most effective solutions.

Top 3 Strategies for Innovation in the Construction Industry Key Descriptios Expected Benefits Off-site Construction -Design & Manufacture → Construct & Install 60% 77% 1 -Within the next five years, 50% of all sites will adopt off-site modular construction or 3D printing, enabling shorter project durations and improved quality Lift Worldoad 2 Digital Transformation -Within the next three years, 65% of the industry is expected to adopt digital technologies such as BIM 70% 83% -Leading construction companies are leveraging smart technologies like BIM (86%), drones (72%), and VR (59%) to boost productivity Work Efficiency ↑ Task Completion Rate Full Asset Lifecycle Support 3 Work Speed -Applying BIM to the entire lifecycle (construction maintenance), beyond the traditional EPC concept, can increase profitability by 14%. -Data accumulation and feedback are essential even during the post-construction maintenance phase. This leads to a virtuous cycle of improved maintenance and performance sustainability. 14% Profitability source: IFS, ENR, FutureTech


IT company IFS and construction magazine ENR have identified the following future smart technologies expected to drive innovation in the construction industry: ▲ Off-Site Construction (OSC), ▲ Digital Twin/Digital Transformation, and ▲ Building Information Modeling (BIM) applied throughout the full project lifecycle. Leading global construction firms such as Bechtel, Fluor, and Jacobs are extending digital technology into construction, safety, and operations. As a result, they are benefiting from increased productivity in the construction industry, improved safety incident prevention, and streamlined maintenance processes. South Korea is also making strong efforts to promote smart construction, with the Ministry of Land, Infrastructure, and Transport announcing “The S-Construction 2030” initiative and launching the “Smart Construction Alliance”. Additionally, many companies are expanding BIM design, adopting AI-based site management, and developing new off-site technologies to enhance the quality and safety of construction sites.


#Hyundai E&C#Global Competitiveness#Overseas Marketing