The Impact of Construction Material Supply Shock on Local Construction Market: Evidence from the Closure of Ready-mixed Concrete Plant in Seoul

This study examines the impact of construction material supply shock on a local construction market by conducting an empirical analysis based on the 2022 closure of the Sampyo Industry Ready-Mixed Concrete plant in Seongsu, Seoul. The ready-mixed concrete industry is characterized by highly localized markets as its output must be delivered from a plant to construction sites within half an hour after production. The closure of the Sampyo Seongsu plant in 2022 disrupted the timely delivery of ready-mixed concrete to construction sites in central Seoul. This disruption in the material supply significantly increased construction costs, resulting in a decrease in construction projects. The difference-in-differences design results show that the supply shock led to a 22% decrease in construction permit issuance in Seoul. Furthermore, the effects varied by building type. Specifically, the number of residential building permits experienced the largest decline, followed by commercial buildings with a relatively smaller decrease. In contrast, permits for public buildings were not affected. These findings suggest that a stable supply of construction materials is critical for ensuring housing market stability.