High public spending is stoking business growth in Saudi Arabia and this has largely boosted cement demand, prompting factories to increase production, the Gulf Kingdom’s largest bank said on Tuesday.
Cement demand in the world’s oil basin has been rising on the back of huge government and private sector projects and an expected surge in public expenditure above budgeted levels will further fuel demand growth, National Commercial Bank (NCB) said in its weekly bulletin, sent to Emirates 24/7.
The report expected government expenditure to exceed the budgeted amount by nearly 13 per cent to reach SR780 billion during 2012.
It said the surge would increase the need for cement to meet the elevated demand levels, adding that production increased by 5.4 million tonnes to reach 48.4 million tonnes in 2011 in comparison to 2010 and 2009’s production of 43 million and 37.8 million tonnes, respectively.
The report said the rise in production was accomplished by the addition of new cement factories in the market, noting that Saudi Industrial Development Fund has recently approved a SR300 billion loan to a new factory in Hail city.
The rising demand has been reflected by local deliveries growing by 13.6 per cent last year, representing 97 per cent of production as the remainder was either exported or stocked as inventory, according to NCB.
As for 2012, the first two months have witnessed an increase in cement and clinker production by 18.0 and 4.9 per cent, respectively over the same period last year. Local demand reached almost 100 per cent growth through January-February as vast projects risk raising local prices.
“We expect the 2012 production levels to increase in the range of 53-56 million tonnes, thus, driving corporate earnings higher and supporting expansionary plans to build a much needed capacity,” NCB said.