The South Korean government has begun managing materials demand as concerns grow that construction projects could be suspended due to the prolonged Middle East war.
Kim Yi-tak, first vice minister of the Ministry of Land, Infrastructure and Transport (MOLIT), attended the "Inter-Ministerial Task Force Meeting for Special Management of Public Livelihood Prices" hosted by the Ministry of Economy and Finance on Wednesday, where he reported on trends in construction material prices and supply, along with response measures.
"While no site has had its entire construction halted (so far), concerns of this becoming reality remain throughout May," Kim said. "There have been some cases of related construction halts due to shortages of insulation materials, waterproofing materials, sealants, and ascon, but we are managing the situation so that the impact of an entire process halt is minimized by prioritizing other processes."
According to a MOLIT survey, in the case of ascon, a key raw material for road paving, supply as of March fell about 70 percent from a year earlier due to reduced production of asphalt, its raw material, while prices rose 20 to 30 percent since the outbreak of the Middle East war. Domestic asphalt production relies heavily on Middle Eastern heavy crude oil, raising concerns that supply and demand could worsen if the Middle East situation persists. MOLIT said it is managing ascon demand with a focus on safety and public livelihood sites, including road restoration, maintenance and repair in preparation for the monsoon season, and roads linked to urgent regional events.
In addition, since the outbreak of the Middle East war, the survey found that prices for ready-mix concrete admixtures rose up to 30 percent, insulation materials up to 40 percent, and adhesives 30 to 50 percent. Over the same period, prices for some products such as plastic windows, sealants, and rebar were found to have risen by around 10 percent.
As a result, concerns over material supply shortages, construction halts, and rising construction costs caused by the war are gradually growing at some urban redevelopment sites in the Seoul metropolitan area. Earlier this month, Lotte E&C sent an official letter titled "Advance Notice Regarding Construction Cost Increases and Schedule Delays Due to Deteriorating Construction Conditions" to the housing redevelopment association of the Gwangmyeong District 9R in Gyeonggi Province. The letter requested that the association actively consider negotiations on construction cost increases or extensions of the construction period if material supply disruptions continue due to the prolonged war. Hyundai E&C also requested that additional construction costs be reflected for the redevelopment association of Daejo District 1 in Eunpyeong-gu.
MOLIT plans to resolve supply instability factors through active demand management, such as adjusting the ordering timing of non-urgent construction and prioritizing the delivery of materials to urgent projects. It also plans to minimize confusion in the market by sharing information through weekly briefings containing the results of material supply checks, and to actively respond to fake news that stokes market anxiety.
If reports of market-disrupting practices such as collusion or hoarding are received, the ministry will take immediate action with relevant agencies including the Fair Trade Commission (FTC). In addition, MOLIT plans to continue efforts to find alternatives to stabilize raw material prices and to provide financial support related to construction periods and costs affected by material supply disruptions.
