This week, Cemtech hosted its latest live webinar which considered global market trends and provided an update on the dynamic Egyptian and Saudi Arabian markets in particular.
Egyptian market update
Solomon Baumgartner, CEO of Lafarge Egypt, delivered an overview of the Egyptian cement sector which is facing both the impact of the COVID-19 pandemic and other structural issues, such as its considerable overcapacity.
Mr Baumgartner noted that January, February and even March were strong months for Lafarge Egypt in terms of sales and it was performing better than the same period in 2019. However, sales fell around 30-40 per cent in the middle of April as the impact of COVID-19 began to be felt.
Furthermore, May was another difficult month as the effects of the pandemic continued, but further pressures on cement demand were added due to Ramadan and a pause on the issuance of construction permits.
New construction regulations are also expected to come into force, with Mr Baumgartner considering them a positive step. However, the timing of the introduction, particularly as the economy is already struggling from the effects of COVID-19, has drawn criticism.
Despite this, June saw a slight recovery and results returned to a similar level compared to the previous year. Going forwards, it is expected to be a slow recovery with full-year 2020 results expected to be around 4-6 per cent below 2019.
Looking at other structural issues, Mr Baumgartner stated that the country’s cement overcapacity – which now amounts to 33Mta – will not regulate itself in the short-term. Increasing exports are also insufficient to resolve the domestic overcapacity issue, although they will help to release pressure from the market. Instead, he called upon the government to make policy changes with regards to providing stimulus packages and raising environmental standards.
Saudi Arabian outlook
Amr Nader, chief strategy, operations and industrial excellence officer for Yanbu Cement, opened his presentation by highlighting how the Saudi Arabian cement sector delivered a strong performance in the first quarter of 2020.
However, in the second quarter of 2020 the top five players in the industry saw a 35 per cent QoQ drop in sales. Due to Ramadan typically being a low-demand season, a 10-15 per cent QoQ drop in consumption was forecast, but the unforeseen impact of COVID-19 accounted for the rest.
Despite this, strong sales in June have resulted in the cement industry showing a V-shaped recovery. Demonstrating their business resilience, many plants also maintained operations with the three market leaders reaching almost normal levels of operation by May.
Like most other countries, logistics restrictions and the closure of ports amid the pandemic has severely impacted cement and clinker exports. Also, in a similar manner to Egypt, Saudi Arabia faces issues with overcapacity. As such, collectively the cement sector now has around 42Mt of clinker inventory – almost a full year’s supply. Echoing Mr Baumgartner’s earlier comments, Amr Nader noted how this shows exports are only a temporary fix for an oversupplied cement industry.
Providing an outlook for the year, Mr Nader stated that before COVID-19 a strong year with around 46Mt of sales was expected (+10 per cent YoY). Factoring in the impact of the pandemic, he now estimates sales to still reach 44Mt (+5 per cent YoY), although downside risks remain, particularly if there is a second wave.