This week, CemNet reported that Yamama Cement has seen a sharp 34 per cent fall in 3Q18 revenues, compared to the same period last year. Meanwhile, profitability declined, falling by around 37 per cent to SAR29.2m (US$7.8m) over the period. The prospect of lower sales though has been expected with August's figures having already seen a slowdown in the Saudi cement market. Analysts Al-Rajhi Capital are forecasting that cement demand will dip below the 40Mt level in 2018, from a market that was achieving 61Mt of cement production in 2014.
Exports - short term solution?
Saudi Arabian cement producers need to find a way to keep their factories running at reasonable production levels. But with domestic cement sales falling more and more manufacturers are turning to exports, especially since export tariffs were cancelled in February 2018. Between June and October 2018, another six export licences have been granted by Saudi Arabia's Ministry of Commerce and Investment, taking the total number of licences to 31.
Positive market forecast 2018-22
Better news is signalled by a market report from a global market research company that says Saudi Arabia's cement market is expected to take off again by setting a CAGR of 5.25 per cent over the 2018-22 period. The kingdom's capacity to push ahead with landmark projects, such as the Riyadh Metro, Al Faisaliya city, Riyadh Medical and above all the US$500bn Neom city, are expected to start raising cement demand.
More efficient cement production
Proactive government policies, such as the Saudi National Transformation Program 2020's goal of improving fuel use in electricity generation by 40 per cent by 2020 are beginning to have an impact. If a project such as Neom City and its move to renewable power is the way forward for Saudi Arabia, then the cement industry is also realising that it must use more efficient cement plants. The country needs to achieve such projects for its economic well-being, if it is to finally diversify from its destabilising ties with oil dependency.
GE Power is among the companies helping the transition and is now commissioning three turbines at Saudi Cement’s Hofuf plant. This will enable the cement manufacturer to become more self-sufficient in power production by increasing efficiency by 3.3 per cent per turbine, reducing fuel consumption and lowering emissions, says GE Power.
Yamama Cement similarly is building more efficient production with its new kiln lines that are under construction at Alhalal Alshamalia. The twin 10,000tpd lines will use a proflame® burner to help substitute traditional fossil-based fuels with a greater kiln feed of RDF. Scheduled for commissioning in 2019, state-of-the-art facility, which is 80km east of Riyadh, should enable Yamama Cement to start winning back market share with its lower production costs.
ICR's November 2018 issue will have a full report on Yamama Cement's new 20,000tpd greenfield project, under construction by thyssenkrupp Industrial Solutions, as well as a market report on Saudi Arabia by Al-Rajhi Capital.