The Mismatch between Economic Strategy and Labor Policy Knocks out the Saudi Cement Market
On February 2012, The Saudi ministry of Commerce and Industry announced an export ban on cement and clinker in order to meet local demand and contribute to price stability in the Kingdom. The only exception was Bahrain, whose market will still benefit from Saudi cement inflow up to 25,000 bags/ week.
The ban had various follow ups including:
- Pressuring local companies to produce at full capacity especially those whose manufacturing plants are located in the western region
- Opening new production lines for existing manufacturing units namely Southern Province Company Whose target production of 10,000 tons/ day will be solely directed to the western region
Until recently, the Saudi market has been dominated by 7 major players whose market share kept sliding from 70% to 80% with a total production of 53.5 million tons in 2012. The most notorious of these are Saudi Cement Company with a market share approaching 17%, Yamama cement coming next with 12%, and Eastern Province Cement with around 7%.
However, all measures undertaken to meet local demand fell flat when local production dropped by 19.7% last November due to a massive wave of deportation of some 60,000 workers. The discordance between the Saudi labor policy and economic strategy had a direct effect on prices which are expected to stabilize by beginning of Jan 2014.
Hajar SAMIR ANOUAR, Associate, Infomineo
Al Rajhi Capital
Al Jazeera Capital