JEDDAH, Saudi Arabia, June 9 (Reuters) - Saudi Arabia’s cement production capacity is expected to jump above 66 million tonnes annually by 2015 from 47 million tonnes this year as the country gears up to meet demand for big infrastructure projects, a report from Al Rajhi Capital said.
“Construction activities have accelerated in 2011 and should continue in the same vein in 2012 and 2013. Consequently, the Saudi cement market has a positive undertone to it in terms of near to medium-term demand growth,” said the report, dated late May.
“Total cement capacity has risen from 31 million tonnes in 2008 to 47 million tonnes currently and is expected to increase to over 66 million tonnes by 2015.”
Saudi Arabia has rolled out three consecutive state budgets of record size as it aims to meet growing demand for housing and improve roads, ports, railways and bridges.
“Overall, we expect demand to rise gradually over the next three years from 41 million tonnes in 2010 to 57 million tonnes by 2015,” Al Rajhi said. It predicted cement prices would cool during the month of Ramadan, between mid-July and mid-August, a time when demand usually slowed, but would overall remain stable for the rest of 2012, ending the year at 249 riyals per ton ($66.40).
Saudi Arabia is the cheapest cement producer in the Gulf Cooperation Council and has a competitive advantage over global rivals as it benefits from subsidised fuel. Its cement production cost is around $30 per tonne against $44 in other GCC countries, the research report said.
There are 11 cement companies listed on the Saudi stock exchange. Al Rajhi’s top three picks are Arabian Cement Co , Al Jouf Cement Co and Yamamah Saudi Cement because of expectations for strong profit growth.
“Arabian Cement is our top pick owing to its robust revenue and earnings growth, proximity to the western region (which is growing rapidly) as well as open investor relations,” it said.