Saudi Arabia: lacklustre domestic demand creates price war

A drop in domestic demand caused by a downturn in government construction projects has triggered a price war among cement producers in Saudi Arabia, according to local newspaper Al-Youm.

The National Cement Committee of the Council of Saudi Chambers acknowledged the price war but said it was not involved in it. “The committee has nothing to do with the decline in cement prices or the price war which is happening in the market,” said Committee Chairman, Jihad Al-Rasheed.

The newspaper reported competition among the kingdom’s 12 major cement companies had escalated after prices plunged to one of the lowest levels seen in the country. With projections of local consumption shrinking by nearly 20 per cent in 2017, the outlook is not particularly positive.

“Some companies are selling their products at cost price as stocks continued to rise to reach nearly 30Mt. This has led to a sharp fall in their profits in 2016,” Al-Youm reported.

Net earnings of Saudi cement companies dipped by about 23 per cent to nearly SAR4.52bn (US$1.2bn) in 2016 from around SAR5.89bn in 2015.