Saudi Cement Company (SCC) is well-placed to take advantage of the increasing demand for cement as Saudi Arabia moves ahead with unprecedented investment in transport, housing and social infrastructure sectors.
Domestic demand for cement in the kingdom increased by 13.2 per cent in 2010 and 13.9 per cent in 2011. Local investment bank NCB Capital predicts demand in Saudi Arabia will further increase by 10.8 per cent in 2012 and by another 8 per cent in 2013.
In the short term, there will be little opportunity to boost export sales, with the Trade Ministry extending its cement ban, which has been in place since 2008. The ban was initially conditional: cement firms could export cement if it was sold at a maximum of SR200 a tonne, a quarter lower than the current market price. However, on 14 February, the Trade Ministry introduced a blanket export ban on cement and clinker.
There is also the potential for increased competition in the Saudi cement sector, with the government announcing in March that it will allow cement imports to avoid a supply shortage. However, analysts believe the increased cost of importing cement will prevent a major influx of cement into the kingdom.
In its 2011 annual report, SCC claimed its production efficiency reached 94.5 per cent, considerably higher than the average operating efficiency in the cement industry. This should ensure it remains profitable as long as demand remains high.
SCC also stands to benefit from Kuwait’s impending construction boom, thanks to its shares in the Group International Cement Company. With a number of major transport and infrastructure schemes planned in the coming years, demand for cement in Kuwait will rise as more work is tendered.