Xing Wu
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The author is an analyst at NH Investment & Securities. He can be contacted at [email protected]. — Ed.
January 2022 data shows yy increases for domestic construction orders and the value of construction completed. Overall, domestic construction orders rose 6%, with non-housing and civil engineering orders offsetting the slowdown in housing orders. Despite the enforcement of the Serious Accident Prevention Law, the value of completed construction increased by 19% year-on-year.
January domestic construction orders totaled W13.7 billion
Looking at the domestic construction data for January, overall domestic construction orders came in at 13.7 tn W (+6% YoY). By project owner, the public sector posted W2.3tn (+36% yy) and the private sector posted W11.4tn (+2% yy). By type of construction, housing orders totaled 5.8 tn W (-9% yy), while those for offices and shops climbed to 2.8 tn W (+40% yy), for factories and warehouses at 1.7 tn W (+14% yy), and for civil engineering at W2.7tn (+18% yy). Growth was achieved for all types of construction, with the exception of dwellings. Sluggish housing orders are attributed to tighter reconstruction/redevelopment regulations and a slump in the housing market.
January value of completed national construction totaled 11.2 trillion won
The value of completed national construction reached 11.2 tn W (+19% yy) in January 2022. By type of construction, the figure is divided as follows: residential construction 5.2 tn W (+20% yy), non-residential construction 3.3 tn W (+24% yy), and civil engineering W2.7tn (+13% yy). Growth in residential construction has been spurred by a steady rise in the number of housing starts since last year. For reference, housing starts in 2021 recorded 584,000 units (+11% yy), but housing starts in December 2021 proved tepid at 820,000 units (-23% yy).
The value of the completed construction has increased (yy) despite the application of the law on the prevention of serious accidents
January is a slow season, so the value of completed construction for the month tends to be low. However, despite the slow construction progress of some projects due to both an accident (collapse) at the Gwangju Apartment construction site and the enforcement of the Serious Accident Suppression Law , the amount of residential construction completed for January 2022 reached 5.2 trillion won. For reference, the amount of residential construction completed during 2Q21~3Q21 averaged W5.4 billion, with the number of construction sites increasing during this period in response to an upward trend in the number of construction starts.
According to data from the Korean Customs Service, the import price of bituminous coal increased by 9% mm to USD 143/tonne in January. By estimating a sharp rise in the cost of bituminous coal to over 8,000 W/tonne (+119% YoY) for 1Q22, we believe that the deterioration in the profits of cement players is inevitable in the short term, despite the rise cement sales volume. In the medium/long term, however, continued increases in cement prices to reflect rising costs should offset this negative.
