Saudi Arabia may lift ban on cement exports

Saudi Arabia could soon lift its ban on cement exports following assurances from factories that the prices would be kept low, even as producers in the UAE said the impact could be minimal.

Local Saudi press yesterday quoted Eid Al Qahtani, Executive Director of the Saudi Exports Development Centre as saying the Saudi Government would soon lift the export ban on cement.

"The issue of lifting the export ban on cement was subject to the issue of price stability. Cement prices in the Kingdom have been stable for some time now and that is what will prompt the government in removing the export ban," said Al-Qahtani.

Abdullah Mohammed Al Sayah, President of UAE Cement Factories and Producers Group, yesterday told Emirates Business that an agreement has been reached between the UAE and Saudi producers that there would be no dumping of excess cement from Saudi into the UAE market.

"Everything will be based on the market situation. They will export to the UAE when there is a genuine demand. If local production in the UAE can meet the existing demand, I do not see any reason for concern," said Al Sayah. He refused to further elaborate on the issue. "We are in constant touch with the Saudi producers as well as the UAE Ministry of Economy on production availability and price issues."

UAE cement factories reduced prices by around six per cent with bags being sold at Dh14 and bulk cement at Dh310 per tonne.

The move was in response to the UAE Ministry of Economy introducing a price cap for locally-produced cement at Dh280 per tonne and Dh14 per bag. Many cement companies said the prices have been reduced but not to the extent of what the MOE had asked for.

Meanwhile, reports also indicate the Saudi Ministry of Trade and Industry has entered into an agreement with cement manufactures to fix the local price of a bag of cement at 10 riyals in exchange for the lifting the ban on exports.

Saudi Arabia introduced the ban on cement exports in June last year to ease the supply bottlenecks amid increasing demand across the region. Since the import restrictions have been imposed several Saudi firms have reported quarterly losses.

Last week Saudi Cement Co, the country's second-largest cement producer, said the company's first-quarter profit fell 12.3 per cent following the ban.

The company's earnings during the first quarter of 2009 declined to SR152 million. Demand for cement in Saudi on the other hand has jumped to a monthly record high in March 2009.

According to the NCB Capital report released yesterday, the 12 cement companies in the Kingdom have an estimated annual production capacity of approximately 48 million tonnes. Total dispatches (including exports) stood at 3.46mt versus 2.89mt in January 2009 and 2.94mt in February 2009.

The 3.38mt of cement/clinker sales in Saudi last month "is the highest monthly sales reported in the country," the report said. The sales last month were up 13.6 per cent year on year and 17.6 per cent month on month. Also export sales from Saudi continue to remain below the 100,000 tonne mark. Total domestic sales of companies (including listed and private) stood at 3.38mt versus 2.87mt in February 2009 and 2.97mt in March 2008.

Cement sales outside the Kingdom stood at 77,000 tonnes in March 2009, as against 507,000 tonnes in March 2008 and 64,000 tonnes in February 2009. The 85 per cent year-on-year decline is explained by the government restriction on sale of cement abroad.

However, Qatar and Bahrain will be the main beneficiaries of the removal of export ban. Prior to the export ban Qatar had been importing about 150,000 tonnes of cement and clinker every month (against the 100,000 tonne quota currently allowed by Bahrain.

The special weekly cement export quota of 25,000 tonnes for Bahrain, if fully utilised, should result in sales of 100,000 tonnes per month, the report said.

The two cement exporting companies – Saudi Cement Co and Eastern Province Cement Co – sold 64,000 tonnes and 13,000 tonnes of cement, respectively, outside the Kingdom in March 2009 versus 54,000 tonnes and 10,000 tonnes of cement, respectively in February 2009. Production covered 96 per cent of the cement demand for the month, while the rest was met through old stock. It resulted in a 13-per cent reduction in the cement stockpiles at the manufacturer level.

In contrast, clinker production increased during the month by 23.8 per cent year on year. Companies leading the increased clinker production are Saudi Cement, Arabian Cement, Tabuk Cement and Najran Cement. However, stockpiling of clinker at the manufacturer level is continuing at a slower pace.

At the end of March 2009, total clinker stock held by cement producers was higher by just 1.5 per cent month on month, the lowest rise since the export ban was put in place 10 months ago, said the NCB report.

Mustafa Gorgunel, General Manager at Union Cement Norcem said if the Saudi Government decides to lift the export ban, it would be bad news as far as UAE factories are concerned. "The impact will, however, be minimal. Initially the import will start with cement bags as there are no complications involved. Import of bulk cement will, however, involve the use of port and container facility. It all depends on how much the Saudi firms are going to price their exported cement. At present, factories in the UAE are selling cement at Dh14 per bag," said Gorgunel.

UAE's cement demand, compared to previous estimates has fallen. Earlier estimates had indicated the demand for cement in the UAE is likely to touch 26.2 million tonnes by 2011.

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