Saudi: a belief in brighter days
Some of the shine has been taken off Saudi Arabia’s cement market as a result of the COVID-19 pandemic and lower oil prices. However, the sector remains relatively healthy and the housing market is expected to continue driving demand, while the implementation of mega projects could be a game-changing catalyst. By EFG Hermes, Saudi Arabia.
Saudi Arabia’s long-term potential trumps short-term challenges
Despite the COVID-19 shock, cement demand in Saudi Arabia is expected to grow by 10-12 per cent in the FY20 to 48Mta, according to EFG Hermes, driven by strong demand from housing projects. While 2H20 sales volumes are likely to be flat or slightly weak YoY, the exceptional growth in the 1H20 (+21 per cent) will allow the sector to post full-year YoY growth.
Cement demand from the housing sector, which currently contributes to almost 45 per cent of total demand, is forecast to remain resilient as it is supported by still-strong mortgage growth (despite a scaled-back mortgage subsidy programme). However, EFG Hermes expects cement demand from infrastructure projects in the short-term will decline as the government cuts project spending, which will impact cement consumption at least until the 1H21. As such, cement demand is not forecast to return to growth until FY22.
