With Cement Oversupply in Saudi Arabia, Hopes Pinned on Government Lifting Export Ban

The cement industry in Saudi Arabia is facing a glut even as the government remains undecided about whether or not to lift existing bans on exports. This is now forcing large cement producers to consider slashing output to rein in the overcapacity caused by the oversupply in the domestic market. The export bans were imposed seven years ago to remedy rising cement prices in Saudi Arabia and to ensure that domestic government-backed infrastructure projects didn’t face a dearth of cement.

However, the scenario has since changed. Disappointingly low oil prices have forced the Saudi government to bring in austerity measures and keep non-essential spends on hold. This has led to several infrastructure investments being put on hold until better clarity about the future is at hand. For cement manufacturers, this situation is only compounded by warehouses that are packed to the rafters.

According to recent media reports, some cement plants in Saudi Arabia may halt production lines to regulate cement supplies. The longer the government delays lifting the export ban, the greater will be the possibility of companies stopping production. However, cutting production works against the economic interests of cement manufacturers in Saudi Arabia.

In recent years, cement manufacturers in Saudi Arabia have seen good business thanks to metro projects in Jeddah and Riyadh and expansion plans at the Grand Mosque in Makkah. According to industry representatives quoted in Saudi media, domestic cement demand had risen by about 10% in the last three months owing to healthy demand generated in the Western regions.

Leaders from the cement industry have said that the cement market in Saudi Arabia currently has a surplus of about 22 mn tons – this, in spite of the domestic demand remaining relatively steady. At this point, it is expected that restrictions on the export of cement will only be temporarily eased.

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