Saudi cement industry sees positive upturn, as real estate booms

RIYADH: Saudi cement sales dropped 20 percent in July even as the Kingdom is seeing a revival in its real estate sector in 2021 following the easing of pandemic restrictions.

Output from Saudi producers declined 20 percent to 3.6 million tons in July, compared to 4.6 million tons in the same month last year, according to recent data issued by Yamama Cement Co.

Sales of 15 cement producers declined led by Southern Cement down 35 percent as compared to the same month of the previous year followed by Umm Al-Qura Cement and Al-Safwa Cement falling 34 percent and 32 percent respectively.

The cement markets in the Kingdom, in general, witnessed a decline of about 15 percent in the average selling price compared to last year, Arabian Cement CEO Badr bin Osama Jawhar told Argaam on Tuesday.

He, however, expects stability in demand during the third quarter with a change in weather conditions and the return of construction workers especially those who require institutional quarantine after vacations.

The Arabian Cement company’s net profits jumped by 91 percent to SR100.5 million at the end of the first half of 2021, compared to SR52.7 million achieved during the same period in 2020, and the profits of the second quarter amounted to SR33.5 million.

The company’s second quarter results were good compared to the same period last year, which coincided with a number of precautionary measures to confront the pandemic, resulting in a decrease in demand for cement during that period, and then witnessed a remarkable improvement in June of 2020, said Jawhar.

Arabian Cement CEO attributed the decrease in net income and revenues to the decrease in sales in the second quarter due to seasonality and the advent of Ramadan, Eid Al-Fitr holidays, and the beginning of the summer season, which affected construction work due to soaring temperatures.

Arabian Cement exported about 1 million tons of clinker during the first half of 2021. It has a stock of 2.3 million tons of clinker, which is sufficient stock to meet any rise in demand or foreign export opportunities at reasonable prices, Jawhar said.

Like elsewhere around the world, the pandemic-related restrictions resulted in labor shortage and increased transportation costs, which also affected cement production and the ancillary industries.

Omar Al-Yusuf, general manager of concrete maker Fawasel, told Arab News that several factors contributed to the decline in cement sales in the Kingdom such as higher oil prices and the overall cost of production.

“Cement is manufactured in plants located in remote areas and needs to be transported to work sites, which increases the cost,” he said.

He said the introduction of new regulations regarding the maximum limit for payload, installation of GPS in vehicles used for transportation of goods, etc., also increased the cost of production.

“We expect an improvement in 2022 because the situation is stabilizing and the pandemic is coming to an end,” Al-Yusuf said.

Profits of Southern Cement, the largest cement producer in Saudi Arabia, dropped to SR270 million ($72 million) by the end of the first half of 2021 decreasing by 15 percent, compared to SR318 million ($85 million) during the same period of the previous year.

Tabuk Cement’s profits also fell to SR7.1 million by the end of the first quarter of 2021 compared to SR28.9 million during the same period of the previous year.

Hail Cement reported a 36 percent decline in its profits in the first quarter of 2021.

However, Eastern Cement’s domestic sales increased by 44 percent, followed by Riyadh Cement by 38 percent.

The data showed that seven companies exported 94,000 tons of cement during July 2021, led by Saudi Cement Co. with 30,000 tons of exports, followed by the Arabian Cement Co. (ACC) and Najran Cement, with about 26,000 tons and 22,000 tons, respectively.

The overall production of clinker in July 2021 rose to 37 percent reaching 4.88 million tons compared to 3.56 million tons in July 2020.