Driving transformation: designing the next chapter of cement – Shoeil Al-Aayed, Riyadh Cement

Good morning, everyone. I'm happy to be with you today here, and I hope that we can benefit from the information that we gather today since the kickoff, which were very valuable informations. We will be driving to transformation, designing the next chapter of cement industry. The presentation will highlight the cement industry, a transition into a decisive phase of transformation. It will outline how discipline execution across energy strategy, digitalization, and decarbonization will shape the next generation of industry leaders. The cement industry is at a turning point. What once defined success, scale, volume, and capacity is no longer enough.

Today, competitive is being redefined by efficiency, resilience, and carbon performance. If we look at the global market forecast, we can see on 2024, the value of market is about 384 billion US dollars, and it's forecasted to be 522 billion US dollars in 2034, which is a big market. And of course, out of that, cement company emission share is very high. It counts about 8% of emission, and we have to have so many solutions regarding this emission. And we can look at the energy, and the energy represents 20% to 40% of total cement production, which is the largest controllable cost driver.

Focusing on GCC and KSA cement market, we can see that on 2024, the market value is about 8.6 billion US dollars, and in 2034, it will go up to billion US dollars. And if we look at the Saudi demand is almost 50% of the GCC demand. In the cement production in Saudi Arabia, it was in 2024, 51.2 million ton, where in the GCC, almost 95 million ton. Global-wise, 4.2 billion tons, and if we exclude China, which represents more than 50% of the production, we can find out that GCC countries will represent 5% of the world production, excluding China. And of course, Saudi Arabia is rating the 10th globally.

Saudi sector, in the Saudi cement sector, the carbon emission, we have to work on it very closely. Of course, the Ministry of Industrial and Mineral Resources, they lead the LFDP program, which is estimated to reduce Saudi cement sector CO2 emission by almost 5.5 million tons, which value approximately 15% reduction, which is very significant for this year. Because at the end of this year, we will be able to connect with the national grid, and we will be able to connect also with gas as planned. And if it goes as planned, then we will be, Inshallah, reducing a very significant reduction.

If we look at the global cement sector structural challenges, we can see the decarbonization, which was very much highlighted today by our previous speakers. It's the name of the game, and everybody has to work on that, even though it's a little bit costly for the industry. Chronic overcapacity, it looks like it's disease all over, and this puts lots of pressure on prices and export also. Fragmented regulations also is another challenge, and of course, cost and margin volatility is also a pressure on the industry. Also, capital intensity dilemma, also another structural challenge. If we look at the Saudi cement sector challenges, it's not different from the world, but priorities is different.

We can see the inventory, heavy system. Clinker is reaching about 45 million tons of clinker, which translates to more than 55 million tons of cement. This is enough for the whole year for the demand of Saudi Arabia. And this is putting lots of pressure on pricing and it will remain unless we have a solution to that, even though we have mega and giga projects, but it's not helping at this time, and we think that it might not be a big help till 2030. After that, it might ease a little bit. Utilization below optimal and everybody is using between 65% and 70% of their capacity of production, which puts lots of burden on cost.

Pricing is sensitive due to the big volume of inventory, and decarbonization is also a big challenge for us because it's a little bit costly. And as Engineer Muslim said, we are aiming to reach approximately 600 kilogram CO2 per ton. And hopefully by the help of the ministry and also by advancing our plants and going for more upgrading and digitalization and so forth, we will be, Inshallah, reaching that number. And finally, the exports. The export nowadays is used as a balancing lever, where it should be the other way around. And this, we need the intervention of the official authority to help us exporting more clinker, and then this might ease little bit things of the high volume inventory.

What transformation really means, it's very simple. If you're looking at it, it's going from volume to value, and also going from energy risk to energy strategy, from compliance to competitive carbon advantages, and from manual operational to digital performance. Digital transformation as a profit lever, we can see the immediate advantage of predictive maintenance, which could reduce the unplanned downtime by almost 50%, and also the maintenance cost reduction of 10% to 15% achieved through condition-based maintenance. And finally, advanced process control and AI optimization will improve process stability and enable higher sustained production rates.

Practical decarbonization pathways, it works on three phases at least. For the first phase, which is the hanging fruit or quick win, we call it no regret action. Immediate cost and carbon benefits will help energy efficiency and reduce clinker factor. And scalable lever, which is the phase two, where economics and supply chain exist, alternative fuels and gas transition, and also supplementary cementitious material ecosystems. And in phase three, which is very deep, which we call deep decarbonizations, this is a long-term and capital intensive, and this will have to go with CCUS, also to the CO2 transport and storage infrastructure, which is a little bit costlier than others.

Okay, for the opportunities for next generation leaderships. There are so many opportunities, like operational excellence. Let's deploy predictive maintenance and APC, advanced process control, to lift availability and reduce maintenance spending. And also market differentiations where you can have giga and mega projects on reliability and cost advantages, as well as carbon readiness, and you have to build SCM supply chain and prepare for future CCUS infrastructures. Thank you so much.