Saudi producers unlikely to benefit from export ban

Cement makers in Saudi Arabia are unlikely to benefit from the government's decision to lift a ban on exports due to higher tariffs, according to Saudi Cement Chairman, Khaled Al-Rajhi.

The sector has suffered from weaker demand and lower government spending on infrastructure. As a result, clinker inventory had risen to record levels by the end of 2016, Mr Al-Rajhi commented in the company’s 2016 annual board report.

Last September local cement producers competed for market share amid inventory build-up by offering discounts. Profit margins for most companies narrowed as high transportation costs also weighed on their finances. The sector will face new challenges due to a sustained rise in clinker stockpiles following corporate expansions, added Mr Al-Rajhi.

In February 2016 Saudi Cement’s Board of Directors decided to temporarily shut down its 3500tpd Kiln 6  until market conditions improve.

The company’s clinker production declined by three per cent to 7.6Mt by the end of 2016. Saudi Cement also pushed back the opening of its loading station at Hofuf plant and upgrading its railway system to mid-2017, instead of the original deadline set in January 2016.

Saudi Cement’s sales dropped eight per cent YoY to SAR1.78bn (US$474bn) last year, which implies an average sale price of SAR245/t compared to SAR251/t in 2015, based on calculations by Saudi investment house Argaam.