Saudi cement demand likely to drop in 2019

Saudi Arabia's cement industry continues to remain under pressure for the third consecutive year, with the local sales volume registering a 13 per cent drop in 2018 compared to the figures of the previous year, according to Al Rajhi Capital.

The average sales prices remained weak in 2018, although the industry witnessed a sharp jump in cement prices sequentially in the last quarter for a number of companies, said the Saudi-based group in its report.

This can be attributable to producers preference towards higher pricing and the postpone of the price war, it stated.

"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 in the report.

The governments announced mega projects (including Neom, Qiddiya, Red Sea Tourism and social housing) are likely to create an incremental demand only in the long-term, stated the Saudi financial group.

"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 added.-TradeArabia News Service