Saudi cement sector under pressure, sales down 6pc

15/05/2016 05:37 AST

The cement sector in Saudi Arabia continues to be under pressure as infrastructure investments decline due to low crude prices, lower fuel subsidy, inventory pile up, and higher competition, said a report.

The total cement sales in Saudi Arabia fell six per cent year-on-year to 5.4 million ton in April, while it was down seven per cent month-on-month, stated top Saudi lender Al Rajhi Capital in its report.

Total inventory stood at 21.9 million ton, representing 36 per cent of last 12 months sales. Inventory grew four per cent y-o-y but declined one per cent m-o-m, it stated.

Cement production in the kingdom came in at 5.6 million ton during April, down two per cent y-o-y and declined five per cent m-o-m.

City and Al Jouf cement witnessed the highest increase in sales with over 30 per cent and over 29 per cent y-o-y respectively, while Najran and Hail cement April dispatches fell sharply by 38 per cent and 25 per cent, respectively, it stated.

Interestingly, the Al Rajhi Capital report found that April dispatches showed strong demand in the central region, compared to weak demand in the western and Southern regions.

The situation could improve with the recent decision by the Saudi government to lift the ban on Bin Laden Group and permit them to bid for major contracts in the kingdom, according to the report.

The company's resuming the business activities in the kingdom will support cement consumption, it added.

On the 2016 outlook, Al Rajhi said: "We expect Najran cement, as well as Eastern Province, Saudi, and Yanbu cement companies to benefit the most from export approval. However, only three cement companies applied for export approval until now, according to Argaam. In April, Saudi cement index rose 4 per cent, compared to TASI’s 10 per cent.-

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