Saudi Arabian cement industry in line for bumper year

21 November 2012

Strong demand driving growth in Saudi cement production and sales for kingdom’s producers

The first nine months of 2012 has been both productive and profitable for Saudi Arabia’s cement industry, compared with the corresponding period of 2011.

A report published by Kuwait’s Global Investment House (GIH) states that profits for the GCC’s cement manufacturers rose 24.4 per cent year-on-year for the first nine months of 2012. The dollar value of profits was $1.325bn compared with $1.065bn in 2011.   

The growth in profits has been led by Saudi Arabia, which is the GCC’s largest market. The kingdom has witnessed a rise in cement sales of 17.6 per cent, driven by a rise in demand of 10.8 per cent and an 8 per cent increase in prices. Production in the kingdom rose by 8.4 per cent to 39.1 million tonnes.

Saudi Arabia’s major producers have enjoyed an excellent first nine months of 2012. Saudi Cement Company (SCC) acquired a 16.7 per cent share of the kingdom’s cement production based on annual output of 11.5 million tonnes and gained 16 per cent of total dispatches.

Southern Province Cement (SPC) and Yamama Cement ranked second and third respectively in terms of market share. The top three Saudi Arabian cement companies accounted for 42.8 per cent of total production and 40.7 per cent of all dispatches.

Increased demand has also meant average prices have risen 8.3 per cent in the first three quarters of 2012, almost hitting $70 a tonne. Gross margins have grown slightly to 53.5 per cent from 53.3 per cent in 2011.

GIH predicts cement production and profits will increase commensurately in 2013, citing the huge infrastructure spending planned by Riyadh.

The increased production reflects the rise in the number of project awards made across all of the kingdom’s sectors during 2011. According to Middle East projects tracker MEED Projects, about $115bn-worth of projects were awarded in Saudi Arabia last year.

By comparison, MEED Projects states that only $37.8bn-worth of projects across all sectors were awarded in the first nine months of 2012. This figure is $102bn lower than the corresponding period in 2011.  

Despite this, the 2012 performance of the major cement producers suggests the kingdom’s cement industry is in robust shape.  

Cement production, however, has always been considered an excellent barometer of how well a particular country’s projects sector is performing and with the kingdom’s project awards significantly down year on year, 2013 might be a lot tougher for local producers.  

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