It has been revealed that the potential losses of major domestic construction companies last year approached 2 trillion won. This is due to the prolonged construction industry downturn, rising raw material and labor costs, increased cost pressures from construction delays, and a higher likelihood of insolvency. Forecasts suggest that losses will grow further this year as construction costs are expected to inevitably rise due to the Iran war.
According to an analysis by Seoul Economic Daily on March 13 of the business reports of the top 10 construction companies by construction capability evaluation, the total construction loss provisions (individual/separate basis) amounted to 1.9937 trillion won. This represents an 8.7% increase (160.8 billion won) compared to 1.8329 trillion won the previous year.
Construction loss provisions are liability items that construction companies record in advance as expenses when future losses are anticipated on ongoing projects. When construction costs exceed the contract amount compared to initial estimates between the time of contract award and completion, and the construction project is expected to turn into a deficit, the difference is treated as a loss. The larger the construction loss provisions, the more project sites are operating at a loss.
Among the 10 construction companies surveyed, half—five companies—saw their construction loss provisions increase compared to a year ago. Samsung C&T, ranked first in construction capability, saw its provisions rise 16.2% from 125.2 billion won in 2024 to 145.6 billion won last year. Hyundai E&C and Daewoo E&C, ranked second and third respectively, saw their related liabilities increase from 52.8 billion won to 69.9 billion won and from 186.1 billion won to 303.4 billion won during the same period. POSCO E&C (52.5 billion won → 113.9 billion won) and SK Ecoplant (81.7 billion won → 412 billion won) also experienced sharp increases in construction loss provisions within a year.
Industry analysts attribute the surge in construction loss provisions among major builders to soaring interest costs, raw material prices for cement, ready-mixed concrete, and steel reinforcement, as well as labor costs, combined with an increasing number of project sites experiencing extended construction periods due to the economic downturn. An official from a major construction company said, "Construction loss provisions are not finalized, but an increase in their scale means there are many projects being carried out at a loss. There are concerns that financial conditions will worsen further this year as prices and construction costs continue to rise."
The possibility of insolvency is also increasing, with construction companies failing to receive payment on time. Construction companies generate cash flow from operating activities by recognizing revenue according to project progress, billing clients, and then collecting cash. However, unbilled construction work—where payments have not been billed to clients such as reconstruction associations or developers—is surging. GS E&C, ranked fifth in the industry, saw its unbilled construction amount increase by 96.3% (225 billion won) from 233.5 billion won at the end of 2024 to 458.5 billion won at the end of last year. POSCO E&C, ranked seventh, also saw its unbilled construction amount rise by 122.7 billion won within a year, from 1.5119 trillion won at the end of 2024 to 1.6346 trillion won at the end of last year.
