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Jeddah - Yasmine El Tohamy - Ministry of Industry works to rectify supply and demand gaps in Saudi cement sector
RIYADH: Saudi Arabia’s cement sector is suffering declines in revenue and high production input costs, as well as a substantial gap between supply and demand, according to the Head of the National Cement Committee Badr Johar.
Despite upheaval faced by the sector, its market value stands at SR50 billion ($13 billion), and it continues to contribute significantly to the Kingdom's economic development and Vision 2030 goals, Johar said, according to Argaam.
The Ministry of Industry and Mineral Resources is working to ensure the sector’s consistency by intensifying efforts in response to the many shifts occurring in the sector, Khalid Al-Mudaifer, vice minister for mining affairs at the ministry said after a meeting with Johar.
The ministry aims to increase the industry’s profitability as well as its social, environmental, and economic contributions to Saudi Arabia’s economy.
Cement plays a crucial role in the development and implementation of mega projects and housing developments in the Kingdom, and its financial stability is also key for the success of the businesses surrounding these projects, Al-Mudaifer added.
Last year, many cement projects saw a decrease in demand due to interruptions caused by the COVID-19 pandemic. This year, with Saudi Arabia witnessing a resurgence in construction activities due to giga projects including The Red Sea Development Co., NEOM and Qiddiya, the sector looks set to recover.
“The industry will be positively affected by renewed construction in the north, with The Red Sea Project, and residential developments. The effect won’t be immediate but will reflect over the long haul, until 2030,” said Omar Hatoum, general manager of Saudi concrete products manufacturers, SACEP, in an interview with Arab News back in April.
Mazen Al-Sudairi, head of research at Al Rajhi Capital, expects construction activity to boom on the back of rising commodity prices that have soared significantly this year, according to a cement report released by the asset management firm in late March.
“We also expect the inflationary trend to cap cement demand, as we expect cement sales will be flat to negative in 2022, compared to 2021, and constrain an increase in cement prices,” he said.
Although Al-Sudairi sees the financial performance of the cement sector improving, he expects improvement to be capped by weak demand and pricing conditions.
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