Cement prices are expected to ease in the Central region of Saudi Arabia as more projects are awarded in other regions, Aljazira Capital said in its December 2023 report.

Prices have been pressured by the fierce competition in the Central region, where most of those construction activities are conducted, leading to high inventories.

“The underlining potential in the Saudi cement sector is estimated to be witnessed over the mid and long run,” the brokerage said, expecting volumetric sales to recover by three percent in 2024 from a drop of 8 percent last year due to higher acceleration in giga projects.

The cement sector witnessed a 7.4 percent decline in local dispatches to nearly 43 million tonnes in 11 months of 2023 due to weak demand from housing construction activities. 

Average new mortgages per month were down 39 percent year-on-year (YoY) in 10 months of 3023).

There was a 13 percent YoY increase in clinker inventories to 39.75 million tonnes as of November 2023, after recording the highest level in three years in October 2023.

“We expect that the construction of giga projects and government capex will drive the demand for cement,” the report said.

Saudi Arabia represented 44 percent ($44 billion) of the total $101 billion worth of projects awarded in first half of 2023 in the MENA region and about 35 percent of the estimated $3 trillion total value of the project pipeline in the MENA region, Aljazira Capital added.

Meanwhile, demand from the private sector is expected to improve this year, given the anticipated interest rate cut, which will ease the pressure on the private sector funding costs. 

The hosting of Expo 2030 and a possible 2034 FIFA World Cup in Saudi Arabia and related construction activities will boost the demand for cement in the upcoming years, the report added.

(Writing by D Madhura; Editing by Anoop Menon)

(anoop.menon@lseg.com)

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