Total cement sales in Saudi Arabia fell 19 per cent year-on-year (y-o-y), but grew 16 per cent month-on-month (m-o-m) to 4.7 million tonnes in March. Clinker production came in at 4.6 million tonnes during March, down three per cent y-o-y, a report said.

Historically March has generally seen the highest monthly sales in a year, according to the study “Saudi Cement Sector – Monthly” released by Al Rajhi Capital, a top financial advisory services provider.

Total inventories continued to rise 37 per cent y-o-y and 1.2 per cent m-o-m driven by current mismatch between supply and demand, representing 59 per cent of the last 12 months’ sales.

“Surprisingly, City cement was the only producer that reported positive y-o-y growth for the fourth month in a row, however, we believe that this growth was driven by offering deep discounts on sales,” Al Rajhi said in the report.

On the other hand, Northern and Hail cement witnessed the sharpest decline in sales of -53 per cent and -47 per cent y-o-y, respectively.

Key findings:

In Q1 2017, cement sales volume fell 20 per cent y-o-y to 13.5 million tonnes, while clinker production declined 6.7 per cent y-o-y. Northern and Najran cement witnessed the sharpest drop during the quarter by 55 per cent and 45 per cent, respectively. Despite the stiff competition in the sector, three cement companies namely, City, Yanbu and Qassim were able to improve their market shares by 2.4 per cent, one per cent and 0.5 per cent, respectively.

In Q2 2017, Al Rajhi expects cement dispatches to decline by 18 to 20 per cent y-o-y as current modest demand wil continue given that construction activities are bound to remain weak for the foreseeable future as the government spending adjusts to low oil prices through spending cuts and prioritisation of projects. Also, Ramadan season and Eid Al Fitr this year will fall in Q2, unlike last year, when six days of Ramadan were included in Q3.

Notably, cement exports (mainly to Bahrain) by Saudi, Eastern and Riyadh cement declined 55 per cent y-o-y in March to 34,000 tonnes. In 2016, Saudi, Eastern and Riyadh cement’s exports to Bahrain constituted eight per cent, six per cent, and five per cent, respectively of their sales volumes. This drop in exports came after news reports (Al-Eqtisadiah newspaper) that Saudi cement producers have halted exports to Bahrain since mid-March, after the Saudi government raised export rates by 50 per cent.

On the inventory side, Hail and Najran hold the highest level of inventories as compared to last 12–month sales volume by 129 per cent and 107 per cent, while Arabian and Qassim cement hold the lowest levels of 8 per cent and 25 per cent, respectively.

“With the continuous increase in inventories (30.2 million tonnes), we believe that balancing the market through production cuts is the best option especially for companies that hold high levels of inventory. However, some companies may tend to maintain current production levels prior to the potential impact from another round of energy price hikes in late 2017,” the Al Rajhi report said.- TradeArabia News Service