Saudi Arabia’s plan to build an entirely new US$500bn city, Neom, by the Red Sea has breathed life into the country’s beaten-down cement sector.
Shares of companies such as Saudi Cement Co, Southern Province Cement Co and Yanbu Cement Co, the country’s biggest by market value, have all risen since the kingdom announced the Neom plan earlier this week, reports Arabian Business.
The announcement "is surely a long-term positive for the cement sector - a sector which has been reeling under immense pressure of overcapacity, inventory pile up, cost increases and a plummeting cement price, over the past two years,” said Ankit Gupta, vice president for research at Shuaa Investment Management in Dubai.
After falling 20 per cent this year through 23 October, shares in Tabuk Cement has climbed 28 per cent in the past three trading sessions, more than erasing its decline for the year. Saudi Cement Co, Southern Province Cement Co and Yanbu Cement Co have all advanced at least four times more than the country’s main stock gauge.
Companies such as Tabuk and Al Jouf Cement Co that are located in the north of the country, near to where the new city will be based, stand to benefit most given that logistics are a major cost element for cement companies, Mr Gupta said.
