Saudi Arabias cement industry looks set to continue to be under pressure for the third consecutive year, following the release of figures that show that local sales volumes registering a 13% drop in 2018, compared to the previous year.
According to a report by Al Rajhi Capital, the average sales price remained weak in 2018, although the industry did witness a sharp rise in cement prices sequentially in the last quarter for a number of companies.
The report explained that this could be attributed to producers preference towards higher pricing and the postponement of the price war.
“Going forward, we expect the current sales prices to remain firm as producers are now focused more on pricing rather than volume. Further, the cement demand will continue to decline in 2019, on the back of limited capital spending by the government, coupled with rising construction costs,” it said.
The announcement of government-backed megaprojects, such as Neom, Qiddiya, Red Sea Tourism and social housing, could create an incremental demand, but only in the short-term, the Saudi-based financial group pointed out.
“In addition, weak cement demand will also push the producers to start exporting more to other markets outside Saudi Arabia, which could help the sector to liquidate the current huge inventory level. Overall, we remain on Underweight on the sector, given the current weak market dynamics,” it concluded.
