Saudi cement firms may slash prices amid robust competition
Wednesday, 28 June 2023
RIYADH, June 27 (Arab News): A price war between cement producers is likely to break out in Saudi Arabia's central region on the back of the giga-projects boom, according to a recent report from AlJazira Capital.
Since the majority of the huge ongoing developments in the Kingdom are located in its centre, companies from across the country have ventured into the region, causing competition to soar.
The report added that the central area is also logistically more feasible and accessible for the majority of the firms in the Kingdom, further attracting external players.
"We believe that the competition in the central region might evolve into a price war, and companies could start cutting prices on a larger scale to retain the market share in the region, which will be visible in lower average selling prices starting from the second quarter of 2023," the report said.
During the first quarter, the average selling prices for cement stayed under pressure, falling to SR174.3 ($46.47) per ton from SR186 the previous quarter.
The anticipated drop in prices comes despite the housing boom that pushed cement demand upward in 2022, according to the report.
Local cement sales only accounted for 89 per cent of total clinker production between January 2022 and May 2023, reported AlJazira Capital.
As a result, the sector's overall clinker inventory level surged to 37.6 tons by the end of May of this year.
Clinker is considered the backbone of cement production and is a mixture of limestone and minerals transformed by heat.
According to the consultancy, local cement sales are expected to drop by 9 per cent annually to 46.3 tons this year, whereas inventories will reach 36.9 tons, up 5.5 per cent annually.
By the end of 2023, the businesses covered by AlJazira Capital are forecast to record a decrease of 9.1 per cent year over year in exports.
Saudi Arabia's antitrust authority penalized 14 cement companies with a collective fine of SR140 million for colluding to raise cement prices in the Kingdom in April 2023.