Displaying items by tag: Southern Province Cement

Sinoma International Engineering was revealed this week as the winner of a contract to build a new production line at Southern Province Cement’s Jizan plant. The China-based engineering firm said that the US$330m contract was to build a full line, from limestone crushing to bagging, with an output of 5000t/day. The construction period is expected to take just over two years, suggesting a commissioning date in mid-2025 if work starts now. The project has been in the pipeline for a while with an announcement in mid-2021. It was previously reported that the new line is intended to replace the two existing production lines at the site once completed.

Other recent projects in the country include Yamama Cement’s plans to move its cement plant near Riyadh to a new location. Sinoma International Engineering was also selected as the main contractor in November 2022 for the US$220m project. The relocated line – using both old and new equipment – will have a production capacity of 10,000t/yr. Project duration was estimated at around two-and-a half years following financial contractual commitments. So the earliest this one might be completed is also mid-2025. Eastern Province Cement also started making moves to build a new major upgrade in March 2023 when it started the tendering process for a planned 10,000t/day production line at its Al Khursaniyah Plant. The intention is to replace some of the obsolete lines at the unit. The project dates back to 2015, when it was first announced.

Graph 1: Domestic cement sales and clinker exports in Saudi Arabia, 2013 – 2022. Source: Yamama Cement

The timing of these new projects is compelling given that sales by the local industry peaked in 2015. They declined in 2018 to a low of around 40Mt before stabilising at around 50Mt for the last three years. However, one trend to note is how clinker exports reached 7.1Mt in 2022, the highest figure in a decade, since export rules were relaxed in 2017. They have grown year-on-year since 2018 with the exception of 2020. Cement exports have been lower since 2013 hitting a high of 1.9Mt in 2019, although 2022 was nearly as good at 1.8Mt.

The other big news story from the local sector in 2023 was the US$37m fine that the General Authority for Competition (GAC) levied for price fixing in April 2023. 14 of the 17 main cement companies in the country were found to have broken local competition law following an investigation. Detail on specifically what happened is light, but the GAC said that it took exception to companies “controlling prices of commodities and services meant for sale by increasing, decreasing, fixing their prices or in any other manner detrimental to lawful competition.”

As ever with the Saudi construction market, government spending is expected to keep things buoyant. Although input and logistic costs have risen like everywhere else, energy costs have also risen. This, no doubt, is useful to a government planning on building a bunch of so-called ‘Giga’ projects. Local sales of cement may have dipped slightly in 2022 but building all these big new projects will require plenty of cement. A report by the SICO Bank in January 2023 forecast that local cement demand was expected to remain ‘flat’ in 2023 but that it would grow by 5% year-on-year in 2024. Interestingly, it added that demand from the tourism and exhibition sector would also fuel demand in the run-up to 2030 as various schemes connected to the ‘Giga’ projects reached fruition.

Each of the three projects detailed above are intended to replace existing capacity. This suggests that none of these companies expect the market to grow significantly anytime soon. These cement producers are likely to be focusing on improving efficiencies from their existing market share. Alongside this, exports of cement and clinker have grown, giving combined local and export sales that are similar to the market peak in 2015. Efficiency savings and adapting to a mature market appear to be the way forward for Saudi cement producers in the near-term.

Saudi Arabia: China-based Sinoma International Engineering has won an engineering, procurement and construction (EPC) contract to build Southern Province Cement's upcoming Jizan cement plant, in the province of the same name. YiCai Global News has reported that the plant will have a capacity of 1.83Mt/yr. Commissioning is scheduled to follow 27 months after the start of construction. Sinoma International Engineering's contract covers installation of the entire line, from limestone crushing to cement bagging. The value of the work is US$300m.

Fellow CNBM subsidiary Sinoma Overseas Development previously won a US$220m contract with Yamama Cement for transferal of its Riyadh cement plant's new Line 7 from its old plant to its new location.

Saudi Arabia: Southern Province Cement says that it has finished reviewing submissions for a contract to build a new line at its Jazan cement plant, and is now drafting and reviewing the contract to sign with its chosen contractor. The new line will have a capacity of 10,000t/day and will replace existing production lines.

Southern Province Cement recorded sales of US$357m in 2022, down by 9% year-on-year from US$325m in 2021. The company said that its operating expenses rose, while its cement volumes and selling prices fell. Its profit dropped by 30% to US$80.2m from US$114m.

Saudi Arabia: Southern Province Cement has completed technical studies and commenced construction of a new 5000t/day line at its Jazan cement plant. The company will also build the infrastructure for another 5000t/day line at the site. Reuters new has reported that, together, the lines will replace the plant’s existing production lines.

Saudi Arabia: Southern Province Cement Company plans to upgrade its Jizan cement plant in Abha with a new 10,000t/day clinker production line to replace the plant’s existing clinker lines. The producer plans to launch the project in mid-late 2021.

Many Saudi Arabian cement producers have reported increased annual sales and profits in recent weeks. Southern Province Cement’s sales revenue rose by 27% year-on-year to US$440m in 2020 from US$347m in 2019. Net Profit after zakat and tax increased to US$162m from US$123m. Other producers enjoyed similar boosts. The reason can be seen in the country’s domestic cement sales. They rose by 21% year-on-year to 51Mt in 2020 from 42Mt in 2019. After a promising start to the year the coronavirus pandemic hit local production hard in the second quarter of 2020. However, it nearly doubled year-on-year in June 2020 and kept up the pace thereafter.

Graph 1: Domestic cement sales in Saudi Arabia, 2010 – 2020. Source: Yamama Cement.

Graph 1 above puts the cement sales in 2020 into context over the last decade. Sales hit a high in 2015 but then started to wane as infrastructure spending dried up due to lower oil prices and decreased government spending. A ban on exporting cement was subsequently relaxed but the general market appeared to adapt to the new situation. This changed significantly in 2020 with analysts attributing the turnaround to programs organised by the Ministry of Housing. This growth has carried into 2021 with NCB Capital forecasting an increase of 3.5% in local cement sales in 2021 due to the ongoing housing programs, the country’s so-called ‘Giga’ projects and investment by its sovereign wealth fund, the Public Investment Fund (PIF), as part of its 2021 - 2025 strategy. They reported that demand created by the country’s large-scale projects began to be felt along the supply chain in the fourth quarter of 2020 and associated contracts have started to be issued.

To give an example of the scale of some of these schemes, one of the proposed giga projects is to build a new city called Neom from scratch near the Red Sea coast. The resulting conurbation is intended to showcase new technologies and diversify the Saudi Arabian economy away from hydrocarbons. It has a price tag of US$500bn. An airport was built in 2019 and a next step was announced in January 2021, introducing a 160km linear city without roads called ‘The Line.’ Doubtless it will require lots of cement to realise the dream in whatever forms it happens to end up taking.

The wider picture here is that global oil prices hit a low in April 2020 as coronavirus lockdowns triggered a worldwide drop in demand although they then started to recover. The International Monetary Fund (IMF) estimates that Saudi Arabia’s gross domestic product fell by just under 4% in 2020. In response the PIF has upped its investment in the local economy including in the ‘Giga’ projects like Neom. There has been scepticism internationally about whether these projects will progress any further beyond press releases and actually get built. However, the cement producers’ financial results, cement sales figures and reporting from analysts like NCB Capital show that some investment is happening and it’s having results. The sector still faces a battle against overcapacity. It had a production utilisation rate of just under 70% despite the increase in cement production in 2020. Yet cement producers in Saudi Arabia have done well. While the Saudi Arabian government continues to spend on infrastructure in order to rebalance its economy this looks set to continue.

Saudi Arabia: Southern Province Cement has appointed Hamad bin Sulaiman Al-Bazai as the chairman of its board of directors. Other appointments include Muhammad bin Nasser Al Nabit as vice-chairman of the board and Saud bin Safar Al Burgan as secretary.

Saudi Arabia: Southern Province Cement has appointed Aqeel bin Fateis bin Saeed Kadsa as its chief executive officer (CEO). He was assigned to the position in July 2020. He holds a degree from the King Fahd University of Petroleum & Minerals and joined Southern Province Cement in 1997. Most recently he worked as the Executive Vice President for Manufacturing Services.

Saudi Arabia: Southern Province Cement has appointed Aqeel Futis Kadasa as its chief executive officer (CEO) following the resignation of Safar Mohammad Dhufayer. Kadasa holds a degree in chemical engineering from King Fahd University of Petroleum & Minerals and has over 25 years of working experience. He started his work at Yamama Cement, then worked in the Saudi Electricity Company in the Department of Engineering Services and later joined Southern Province Cement in 1997.

Saudi Arabia: Southern Province Cement’s sales revenue rose by 37% year-on-year to US$165m in the first half of 2019 from US$121m in the same period in 2018. Its net profit after Zakat and tax grew by 53% to US$56.3m from US$36.8m.