Cement demand likely to rise by September-end: NCC exec

Saudi Arabia’s cement market has started to see improved demand since July and will likely witness robust demand levels from the end of September until February 2025, Badr Johar, Head of National Cement Committee (NCC), Federation of Saudi Chambers (FSC), told Argaam.

The demand for cement reached 22.6 million tons during the first half of 2024, which is close to last year’s levels due to the completion of some existing projects and the reprioritization of proposed projects. Johar indicated that project reprioritization was expected as the Kingdom was bracing to host several global events over the next decade, positioning Saudi Arabia among the world's top countries.

Average selling prices of cement increased during H1 due to the higher cost of some production inputs, which boosted the corporate business results in H1 2024 for the second straight year, jumping by 13.5% year-on-year (YoY).

Selling prices to end customers range between SAR 220 and SAR 240 per ton through the distribution channels.

Johar also explained that price wars occasionally occur due to the challenges faced by each company and the varying demand levels, which results in "price competitions”.

However, this situation is unsustainable and does not reflect the real product price or cost. Prices typically return to normal, as the selling prices are pre-determined by the Ministry of Commerce, with factory prices not exceeding SAR 240 per ton.

He indicated that demand has started to get stronger since 2019, backed by the government’s housing ownership subsidy program and the state’s support of real estate developers through specialized ministry programs, which aligns with Vision 2030.

Johar expects demand levels will significantly improve through public-private partnerships (PPPs) in several upcoming developmental projects and international events.

He also expects the Public Investment Fund (PIF) to maintain local capital expenditure as previously announced until 2025.

Clinker stockpiles can be stored for long periods in outdoor yards, as companies adopt recycling methods to maintain stock quality for longer durations. Companies hold an estimated 43.9 million tons of clinker to meet demand for upcoming projects without affecting the current projects, particularly in the construction, housing, and infrastructure sectors.

Factory production reached 28.1 million tons of clinker during the first half, said Johar, noting that the sector is not currently operating at full capacity and companies can increase production capacities as needed.

A surplus in the form of stockpiles undoubtedly affects the cash flows of the producing companies due to continuous production and storage. Companies can, naturally, reduce production if necessary or if stock levels rise significantly, inconsistent with each company’s strategy.

As regards interest rates, Johar stated that their impact is evident on the mortgage loans, which have significantly decreased compared to the past two years. Over the first three years of the “Sakani” program, many citizens benefited from the subsidized home ownership due to the low mortgage costs during that period. Therefore, demand for housing loans is not expected to continue at the previous momentum, as the waiting lists have been cleared, and there are abundant housing units.

The program's targets were achieved in a shorter period than expected, which proved its success, he said.

The housing sector is a fundamental pillar for the cement demand, Johar stated, expecting future demand to stabilize at normal levels aligning with the average population growth rate, along with demand from major project sectors.