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Export fees alarming, says Saudi Cement chairman

Cement makers in Saudi Arabia are unlikely to benefit from the government's decision to lift a ban on exports due to higher tariffs, said Saudi Cement chairman Khaled Al-Rajhi

Cement makers in Saudi Arabia are unlikely to benefit from the government's decision to lift a ban on exports due to higher tariffs.
Cement makers in Saudi Arabia are unlikely to benefit from the government's decision to lift a ban on exports due to higher tariffs.

Cement makers in Saudi Arabia are unlikely to benefit from the government's decision to lift a ban on exports due to higher tariffs, said Saudi Cement chairman Khaled Al-Rajhi.

Al-Rajhi described the government’s fees on cement exports as “alarming". 

The sector has continued to suffer from weaker demand and lower government spending on infrastructure as Saudi Arabia pushes ahead with austerity measures. As a result, clinker inventory had risen to record levels by the end of 2016, he added in the company’s 2016 annual board report.

Last September, local cement producers competed for market share amid inventory build-up by offering discounts. Profit margins for most companies narrowed as high transportation costs also weighed on their finances, Al-Rajhi said.

Higher fuel costs will continue to weigh on the cement sector going forward, he added. The sector will face new challenges due to a sustained rise in clinker stockpiles following corporate expansions.

In February 2016, Saudi Cement’s board of directors decided to temporarily shut down its Kiln 6 (which operates with a daily production capacity of 3,500 tonnes of clinker) until market conditions improve.

The company’s clinker production declined by 3% to 7.6 million tonnes by the end of 2016. The cement maker also pushed back the opening of its loading station at Hofuf plant and upgrading its railway system to mid-2017, instead of the original deadline set in January 2016.

Both projects cost $22m (SAR84m), the report added.

Saudi Cement’s sales dropped 8% YoY to $474bn (SAR1.78bn) last year, which implies an average sale price of SAR245 per ton, based on Argaam’s calculations, compared to SAR251 per tonne in 2015.

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Construction Week - Issue 747
Aug 03, 2019