Demand for cement and steel in Saudi Arabia are expected to witness tremendous growth on the back of huge spending in the fast growing real estate and construction industry, separate studies revealed.
The demand for cement is expected to increase 9.4 percent a year to over 80 million tons (73 million tons) by 2017, a new report by market research company CW Group revealed. An increase in large-scale infrastructure projects is seen as being behind the surge in demand.
In a new study, RNCOS forecast that with the huge spending on the construction of real estate and railways in the Kingdom, the steel consumption in is anticipated to grow at an impressive 19.5 percent during 2012-2015.
According to its report "KSA Steel Industry Forecast 2015", Saudi Arabia has become one of the largest steel consumers in the GCC region due to increasing steel demand for infrastructure and construction projects. Rebar is among the most attractive steel products in the Saudi Arabia steel industry and accounts for a bulk of steel consumption due to a large number of construction projects. In addition, the rising rebar demand has made the country a major rebar importer.
The Kingdom's Ninth Development Plan 2010-2014 includes provisions for massive governmental investments, driving construction's share of GDP to an estimated 5.9 percent by the end of 2014.
However, the report cautions "a unique set of coinciding mega-forces have converged to create this benign scenario, which may not be sustainable, from Arab Spring-motivated investments, industrial policy, unique ownership arrangements, energy subsidies, etc."
In a separate report, AlJazira Capital said Saudi Arabia's domestic cement consumption is forecast to increase at a CAGR of 8.0 percent during 2010-15, and reach 60.6 million tons in 2015 amid higher construction activity and positive GDP outlook.
CW Group said in 2005, cement demand in Saudi Arabia was less than 25 million tons (23 million tons). Since then the market has seen double-digit growth, taking it to 53 million tons (48 million tons) in 2012.
"Admittedly, our 2017 demand number is aggressive, but the government's resolution to spend its way to social harmony in the Kingdom is proven and should not be underestimated. We expect more projects to be announced together with expansion of existing projects," CW Group said.
More than 25 million tons (23 million tons) of new cement production capacity has been announced to be commissioned by the end of 2017 with the bulk of the production lines scheduled to come on stream in 2014 and 2015. CW Group said Yamama Cement and Eastern Province Cement have announced the most ambitious projects, each planning to add 3.5 million tons (3.2 million tons) per year.
A surge in cement prices has prompted price caps and the Saudi Ministry of Commerce has reinstated an export ban for both cement and clinker.
CW Group noted that "Saudi Arabia will be the contender in the region and be a very strong competitor for regional export markets if it develops the logistics, marketing and distribution capabilities."
The Saudi Gazette