Consultant

Saudi cement demand up despite COVID-19 lockdown

First half volumes likely to grow 10% from 2019 says Al Rajhi Capital report

Saudi Arabia’s cement sector has witnessed an 11% growth in material demand for the first five months of 2020, compared to the same period last year, despite the lockdown due to the COVID-19 pandemic, a new report from Al Rajhi Capital, a Saudi financial services provider, has found.

The report said that leading providers such as Qassim Cement and Yanbu Cement reported their highest y-o-y growth of 21% and 18% respectively for the combined period of April and May 2020. This indicated that volumes are likely to grow by 10% over the same period last year, it added.

After including Al Rajhi Capital’s estimate for June, the first half volumes are likely to grow 10% from last year. However, q-o-q cement volumes have declined by almost 50% (comparable for the first two months of Q1 and Q2 2020), it stated.

The Saudi financial service group pointed out that this was in-line with its earlier estimates.

However, the kingdom’s other major companies – Saudi Cement and Arabian Cement – had performed very badly, reporting a -4% and -2% y-o-y growth for the similar period, it said.

Going forward, Al Rajhi Capital said that it expects the reopening of the economy will further boost the cement demand in the country as construction projects and mortgages would pick-up, although gradually.

“We estimate that for the next couple of years, the industry would witness moderate volume growth of around 4% to 5% (prior estimate 6-7% growth),” the Saudi group stated in its review.

“The sector would continue to face certain headwinds such as lower government spending as well as slow recovery process from Covid-19 as the number of new cases is still on a rising trend; however, tailwinds such as robust mortgage growth (already clocked more than 50% of 2019 disbursements in the first four months of 2020) would encourage increased construction, thereby, would support cement demand,” it added.

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