Sungshin Cement, which had secured a contract worth 80 billion KRW for the Saudi Arabian Neom City project, has halted operations at its local plant and withdrawn from the country just one year and six months after entering the market. This move is attributed to a significant deterioration in Saudi Arabia's fiscal conditions, caused by falling oil prices and rising project costs, which have made it difficult to proceed with the project as planned. Analysts suggest this could signal a wave of withdrawals by other companies operating locally, such as Samsung C&T and Hyundai Engineering & Construction.

According to industry sources on May 20, Sungshin Cement stopped operations at its ready-mix concrete plant in the Tabuk region of Saudi Arabia, which was linked to the Neom City project, in January of this year and withdrew part of its local workforce.

Neom City, one of the core projects of 'Saudi Vision 2030,' is based on developing a 26,500 km² area (44 times the size of Seoul) near the Red Sea in northwestern Saudi Arabia into a low-carbon smart city. The project consists of three major components: 'The Line,' a 170 km linear city; 'Oxagon,' an advanced industrial complex on the sea; and 'Trojena,' a mountain tourism complex. The total project cost amounts to $1 trillion (1,390 trillion KRW).

Sungshin Cement began its participation in the Neom City project in 2023 by establishing a local subsidiary, Jinseong Industrial, in Saudi Arabia. The company then signed a construction contract worth 80 billion KRW with Samsung C&T and supplied ready-mix concrete to the 'Running Tunnel (SNRT)' site, which is part of The Line project within Neom City.

This followed the June 2022 contract in which a consortium of Samsung C&T and Hyundai Engineering & Construction secured the Neom City Running Tunnel project worth $1 billion (1.39 trillion KRW). The Running Tunnel is a 28 km underground tunnel within The Line, which, upon completion, was planned to serve as a high-speed and freight railway.

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However, as oil prices have recently fallen, the fiscal situation of Saudi Arabia's Public Investment Fund (PIF) has worsened, foreign investment has decreased, and expected project costs have risen. These multiple negative factors have triggered warning signs among Korean companies involved in the Neom City project. As the client's ability to raise funds has weakened, project delays have not only become frequent but have reached the point where construction has effectively stalled, disrupting the activities of Korean builders. Ultimately, this led to Sungshin Cement, the only Korean company supplying ready-mix concrete locally, halting its business. However, Sungshin Cement plans to continue pursuing other contracts in Saudi Arabia beyond the Running Tunnel project.

An official from the International Contractors Association of Korea stated, "It is true that Neom City has entered a 'slowdown' (a situation where construction is delayed), and it seems difficult to complete the project as originally planned." The official added, "Saudi Arabia, which is preparing to host major sports events like the World Cup, has recently prioritized sports events over Neom City as a national priority, and this is also a negative factor for the smooth progress of the Neom City project."

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Korean construction and cement companies are considering shifting their focus from Neom City to Riyadh, Saudi Arabia, in search of additional contracts. However, many believe that even these efforts will face challenges due to fiscal pressures and oil price fluctuations. Saudi Arabia is set to host major sports events, including the 2029 Winter Asian Games, the 2030 Expo, and the 2034 World Cup. As a result, demand for overseas contracts related to local infrastructure and stadium construction is rising.

An industry insider commented, "There are certainly opportunities, but it is realistic to say that large-scale short-term contracts or stable profits will be difficult to expect. Fiscal pressures and uncertainties still exist, so even if contracts are secured, there is a significant possibility of delays."

With the situation unfolding this way, the possibility of withdrawal by Samsung C&T and Hyundai Engineering & Construction is now being seriously discussed. Since the Saudi government has not officially abandoned the project, the project itself is not being terminated, but as normal construction has become difficult, it may be more reasonable for companies to withdraw for now and reassess the situation depending on future changes in the Saudi government or the political climate in the Middle East.