"The CEO tried to hold on, even resorting to forced restructuring, but in the end, the company had to shut down."

"I heard they lost 1 billion won over the past six months. The CEO was in tears."

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T Company, a ready-mix concrete firm located in Dalseong-gun, Daegu, closed its doors on June 30. This company had been in business for 35 years. More than 30 employees and 15 ready-mix truck drivers?over 40 people in total?lost their jobs overnight. A ready-mix truck driver who worked there described the situation as follows.

Industries that depend on construction company orders?so-called downstream industries?are faltering one after another. The construction industry has a significant ripple effect on other sectors. Ready-mix concrete suppliers, which provide concrete to construction sites, are a prime example of a downstream industry that cannot survive without construction companies. Recently, three ready-mix concrete companies in Daegu have closed, and two more are preparing to shut down.

According to the Bank of Korea, the backward and forward production inducement coefficient for the construction industry was 1.970 last year. This is similar to the manufacturing industry (1.973) and higher than the all-industry average (1.804).

The cement industry is also expecting the worst sales figures in its history this year. A representative from the Korea Cement Association stated, "Domestic cement sales in the first quarter of this year dropped by 22% compared to the previous year," and added, "Annual sales are very likely to fall below the projected 40 million tons."

Of the approximately 30 cement production kilns nationwide, 11 have already stopped operating. The representative explained, "The cement industry is equipment-intensive, so investment in maintenance and environmental upgrades is ongoing," and added, "Profitability deterioration is extremely severe."

On the 13th, a ready-mixed concrete truck is moving at a ready-mixed concrete factory in downtown Seoul. Photo by Yonhap News

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The steel industry, which produces rebar and other construction materials, has also not been spared. As construction demand declines and orders plummet, cases of factories halting operations are increasing rapidly.

Dongkuk Steel's Incheon plant suspended operations for the first time in 53 years, and Hyundai Steel's Pohang Plant No. 2 has halted production of rebar and special steel bars, entering an indefinite shutdown.

The recent wave of construction company bankruptcies has devastated the subcontracting ecosystem. Specialized construction firms, which survive by subcontracting detailed processes such as rebar, electrical, and window installation, have been directly hit by both a decrease in construction volume and the worsening liquidity of construction companies.

At apartment construction sites, dozens to hundreds of subcontractors typically sign contracts. If the prime contractor that is supposed to pay them goes bankrupt, a domino effect of subcontractor bankruptcies follows.

Construction has been halted at an apartment construction site in Daemyeong-dong, Nam-gu, Daegu. Photo by Kang Jin-hyung

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According to industry insiders on the 30th, cases of subcontract payments being reduced or delayed are happening frequently. As companies go bankrupt or close down, and payments are not made, the difficulties faced by the specialized construction industry are intensifying.

The head of a specialized construction company in the Gyeonggi region stated, "If the payment owed by the prime contractor is 100, they only pay 70," and added, "They say the remaining 30 will be paid after completion, but in the end, they demand a reduction."

A representative of a specialized construction company in the Busan region also explained, "General contractors secure their own margins at the contract stage and pass the rest on to subcontractors," and added, "Even if raw material prices rise, they reduce losses by cutting subcontract prices, so the prime contractor is not severely affected."

He particularly pointed out, "General contractors repeat bidding until they get the unit price they want," and added, "There are no restrictions on failed bids in private projects, so only the lowest bid is ultimately accepted." This means that subcontractors must accept losses to win contracts, and the resulting losses are borne by the subcontractors.

It is inevitable that not being paid for construction work makes it difficult to even pay taxes. A representative of a specialized construction company in the Jeonbuk region said, "Even if we go bankrupt while working on a 1 billion won project, we still have to pay 100 million won in VAT," and added, "Every day is nerve-wracking." In some cases, instead of payment for construction work, unsold apartments are received, but even then, a 13.2% acquisition tax must be paid.