Saudi cement demand set for +9% growth

Demand for cement in Saudi Arabia is expected to increase +9.4% a year to over 80 million tons (73 million tonnes) by 2017, according to a new report by market research company CW Group. An increase in large-scale infrastructure projects is seen as being behind the surge in demand.

The country’s Ninth Development Plan 2010 – 2014 includes provisions for massive governmental investments, driving construction’s share of GDP to an estimated 5.9% by the end of 2014. But the report cautions, “A unique set of coinciding mega-forces have converged to create this benign scenario, which may not be sustainable, from Arab Spring-motivated investments, industrial policy, unique ownership arrangements, energy subsidies etc.”

In 2005, cement demand in Saudi Arabia was less than 25 million tons (23 million tonnes). Since then the market has seen double-digit growth, taking it to 53 million tons (48 million tonnes) in 2012.

“Admittedly, our 2017 demand number is aggressive, but the government’s resolution to spend its way to social harmony in the Kingdom is proven and should not be underestimated. We expect more projects to be announced together with expansion of existing projects,” said CW Group.

More than 25 million tons (23 million tonnes) of new cement production capacity has been announced to be commissioned by the end of 2017 with the bulk of the production lines scheduled to come on stream in 2014 and 2015. CW Group said Yamama Cement and Eastern Province Cement have announced the most ambitious projects, each planning to add 3.5 million tons (3.2 million tonnes) per year.

But the company said there are concerns for the industry. A surge in cement prices has prompted price caps and the Saudi Ministry of Commerce has reinstated an export ban for both cement and clinker. Access to subsidised energy from state-owned utility Aramco is also expected to become an issue as more cement capacity comes on line.

CW Group said this could impact other countries in the region, “This production capacity raises a loud alarm bell for cement producers in neighbouring markets if the export ban is lifted and energy subsidies continue.”