Yamama Saudi Cement, Saudi Arabia’ third-largest producer by market value, wants the government to lift the ban on cement exports on concern profit margins will drop as supply increases push prices lower.
“Cement capacity is growing every year, which drives many cement companies to seek government approval to lift the existing export ban without conditions,”he company’ general manager Jehad Al Rasheed said in an interview in Riyadh on Sunday. Yamama will post profit in 2011 although the margins will be hurt by higher supply, he said.
Saudi Arabia banned cement exports in June 2008, the peak of the construction boom in the Gulf region, and also allowed major cement producing companies to reduce prices. Cement output capacity in the Arab world’ largest economy may rise to 58Mta by 2013 from 53Mt this year, Global Investment House said in a report last month.
Cement companies requested the kingdom’ Supreme Economic Council last month to lift the ban, A Hayat reported on November 22. Eight Saudi publicly-traded companies, except Al Jouf Cement that started trading in August, reported a 5.3 per cent drop in third-quarter profit to US$205m from the year-ago period, according to Global.
The demand-supply gap may stay between 5-6Mt till 2013 as “capacity additions outstrip strong domestic demand growth, putting further pressure on cement realisation prices,” Kuwait-based Global said. Cement realisation prices fell 3.4 per cent this year to an average SAR230 (US$61) and may fall to SAR220/t in 2013, it said.
The company’ market share fell to 12 per cent in the third quarter from 14 per cent last year as unlisted companies such as Riyadh Cement, Najran Cement and Medina Cement expanded output capacity, according to Global. Yamama is currently conducting studies to replace old production lines and will raise capital expenditure after approval from the board, Al Rasheed said.