Saudi producers to benefit from Neom Bay construction start-up

Saudi Arabia will start developing the first major area of Neom, the kingdom's multi-billion dollar mega-city, from 1Q19. The founding board of Neom, chaired by Crown Prince Mohammed bin Salman, approved the concept of the masterplan for ‘Neom Bay’ which will be the first residential area to be developed in the city. The construction work will be completed in 2020.

The full implementation phase of the US$500bn Neom project could potentially bring in more than 20Mta of cement demand at its peak construction phase.

Tabuk Cement Co, located closely to Neom project site, would be the direct beneficiary of the project, followed by Yanbu Cement (west), Hail Cement (central) and Jouf Cement (north). Competition is expected to be significant as all major cement players are likely to try to push to increase sales volume aggressively, given their already stretched inventory level. This could limit cement price recovery over the medium term, says analysts EFG Hermes.

Yanbu Cement is located in the high demand western region and potentially a key beneficiary of the Neom project, due to its plant proximity to the north-western region. Moreover its access to export market would further help diversify it from the crowded western region.