Mega-projects to cushion Mena cement makers from global blows

Reuters/Zoubeir Souissi

• Head of World Cement Association predicts strong year ahead for Gulf
• Region’s construction pipeline will help it to buck recessionary trend
• But many Middle Eastern producers reported losses in 2022

Cement producers in the Middle East are expected to have an “exceptionally good year” thanks to the region’s pipeline of mega-projects.

Emir Adiguzel, director of the World Cement Association, said the global industry faced a difficult period but the Middle East would buck the trend.

“According to our members located in the Middle East, the region will not be affected by the upcoming global recession and cement demand will continue to be strong.”

Adiguzel, who is based in Dubai, added that higher energy prices will have a serious impact on cement production costs. “While we do not expect global cement volumes to increase, we do expect prices to surge,” he said.

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The forecast will come as welcome news to the industry after some of the region’s leading producers reported mixed results, with higher revenues not reflected in the bottom line.

The UAE’s Gulf Cement reported a net loss of AED54.4 million ($14.8 million) in 2022, against a AED53 million loss the previous year. Its revenues rose to AED348.1 million last year, from AED340.6 million in 2021.

Losses also increased at Sharjah Cement and Industrial Development Company, reaching AED39.6 million in 2022 compared to a AED33.8 million loss the previous year. This came despite a 29 percent increase in revenue to AED635.5 million.

Ras Al Khaimah Company for White Cement & Construction Materials reported net profits of AED21.08 million in 2022, but this was down from AED32.87 million a year earlier.

RAK White Cement’s revenue hit AED247.66 million in 2022, up from AED239.80 million in 2021.

Yamama Cement Company, one of the biggest cement producers in Saudi Arabia, has revealed that its sales in the kingdom dipped by 2.3 percent in 2022. However, exports to the region rose to 8.94 million tonnes, from 8.18 million in 2021.

It added that production by the 17 cement manufacturers across Saudi dropped to 52.4 million tonnes last year, from around 53.7 million tonnes.

Bassam Abd El Rasoul, group chief technical officer at Egypt’s Misr Cement, suggested that global trends had played a role in these figures – and would continue to have an impact in 2023.

“The market has just started to recover from two dramatic issues, the Covid-19 pandemic and the Russian/Ukraine war, which has led to plants reducing outputs to the local market due to the excess capacity,” he said. 

“Cement producers have faced major difficulties, amid declining demand and surging supply, negatively affecting business continuity. It is very hard to run a business with such variables, which destroy any planning.

“Consequently, there are direct and indirect effects on the cement industry, which we expect to continue till the end of 2023.”

Business consultancy IA Cement has said the Middle East and India “stand out as relative bright spots” for the industry this year. Its Cement 2023 report forecasts 3 to 4 percent growth in cement demand in Saudi Arabia this year for the construction of giga-projects such as Neom and the Red Sea development.

The report also predicts that cement consumption in the UAE will rise by a similar margin, spurred by an increase in public works.

Hassam Chaudhry, an associate professor in the School of Energy, Geoscience, Infrastructure and Society at Heriot-Watt University Dubai, said: “Countries in the Middle East, primarily Saudi Arabia and the UAE, have a strong pipeline of long-term projects that indicates growth potential in the construction sector.

“Due to the ongoing construction activities, there will be a significant increase in the demand for materials – namely, concrete.”

Project contracts worth a total of $110 billion are expected to be awarded in the GCC this year, across power, water, construction, oil and gas.

Saudi Arabia accounts for more than half the total ($64 billion) as it ramps up its Vision 2030 economic diversification strategy. 

It is followed by the UAE at $23 billion, Kuwait at $10.2 billion and Qatar at $10.1 billion, according to data provider Meed Projects.