Export ban has little effect on Saudi cement firms

Export ban has little effect on Saudi cement firms
Published: 28 July 2011

A ban on cement exports in from Saudi Arabia three years ago seems to be having a limited effect on cement suppliers in the kingdom, reports Construction Week.

The cement cap was put in place to ensure the kingdom has enough cement supplies for its vast construction projects.

This includes a ban on cement exports to all countries except Bahrain, where weekly exports were halved from 50,000 to 25,000t. The restrictions also stipulated that local cement companies were required to keep 10% of their products in reserves, and that they would sell bagged cement in the domestic market at US$52/t.

However, Rajat Bagchi, associate researcher at NBK (National Bank of Kuwait) believe this has not adveserly affected the sector, as the cement industry in Saudi relies more on domestic supplies, which are currently benefitting from the high demand

Domestic cement sales grew to 4.2Mt in April, compared to 3.61Mt in the same period last year, say NCB Capital analysts. Private projects, mainly school and residential, are especially increasing the demand for cement.

Bagchi told Construction Week, “There are only 3-4 cement companies interested in exporting in Saudi, in the northern, Eastern and Southern province which usually supply to neigbouring countries. However, there are more domestic suppliers available; there are currently eight in the main market."

The unrest has also dampened exports he added: “Not many companies are interested in exports in the country, because of the limited opportunities for them abroad, because who is available in the market? Europe demands are taken care of by Egypt, and the ongoing unrest in Bahrain and Yemen means there is less market demand in those locations also.”

“They are much better off selling in Saudi as demand has reached 40Mt this year, so they will be much happier selling for a higher price domestically than exporting,” he said.

“I believe the rule restricting exports will actually help the sector, as cement suppliers are better off supplying domestically, as it is more expensive.”

“Demand is looking great in the kingdom, there are a further five economic cities set for construction, and it’s not just the cement sector that will benefit, but it is good for the overall GDP of the country."