Saudi cement prices under pressure as competition mounts

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Strong competition among Saudi Arabia’s cement companies is likely to continue and will exert pressure on prices in the short to medium term, according to a report from investment advisory company Ubhar Capital.

There is ongoing optimism regarding the pipeline of mega and giga projects, as well as anticipated investments related to Expo 2030.

However, slower than expected demand in the real-estate sector has impeded cement offtake, Ubhar Capital said in its first quarter and 2024 corporate earnings estimates.

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Any recovery is expected to be gradual, it added.

The industry’s inventory of clinker – a nodular material used as a binder in cement products – stood at 40 million tonnes, the highest since August 2020.

Ubhar Capital views the stockpile “unfavourably”, particularly in a high-interest-rate environment, as holding costs are likely to be elevated.

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Last year, cement companies faced price challenges due to decreased demand, heightened inventory levels and intensified market competition.

Petrochemical pressures

Ubhar Capital anticipated that the GCC petrochemical industry will experience a challenging environment until the first half of 2024.

This is due to global economic uncertainties including a potential recession, extended periods of higher interest rates, a sluggish recovery in China and ongoing conflicts in West Asia and the Red Sea region.

Although demand for petrochemical products weakened in 2023, a resurgence is expected following the first half of 2024, particularly in Asia.

“Beyond the first half of 2024, we expect stability in the sector and anticipate favourable pricing trends driven by the demand for end products such as plastic packaging, textiles and footwear,” the report said.