Saudi Arabia's cement demand up 11% in first five months of 2020 despite virus lockdown

Growth in mortgages will further support the industry, which is facing headwinds from lower oil prices and government spending cuts

The Riyadh skyline. Demand in Saudi Arabia cement sector has risen in the first five months of this year. Reuters

The cement sector in Saudi Arabia, the Arab world’s biggest economy, reported an 11 per cent year-on-year rise in demand during the first five months of this year, despite an extensive lockdown to stem the spread of Covid-19 in the kingdom.

With inclusion of estimates for June 2020, volume in the first half of this year is expected to grow about 10 per cent from a year earlier, Riyadh-based Al Rajhi Capital  said in a note to investors on Wednesday. Volumes, however, slumped almost 50 per cent, in the first two months of the second quarter this year, from the same period last quarter, reflecting the complete and partial closure of the kingdom’s economy during that period.

Saudi Arabia, like many other countries, closed its borders and enforced strict movement restrictions across the kingdom to curb the spread of the Covid-19 pandemic. The kingdom's economy has gradually opened up, but the incidence of Covid-19 infection is still significant, which has prompted the government to limit the number of pilgrims to this year’s Hajj.

“Going forward, we expect that the reopening of the economy is further expected to support the cement demand in the country,” Al Rajhi said. “We estimate that for the next couple of years, the industry will witness moderate volume growth of around 4 per cent to 5 per cent [down from] a prior estimate [of] 6 per cent to 7 per cent growth.”

The cement sector will continue to face headwinds, including lower oil prices and reduced government spending as well as a slow recovery from Covid-19. However, tailwinds such as robust mortgage growth – which already clocked more than 50 per cent of 2019 disbursements in the first four months of 2020 – will encourage increased construction, supporting cement demand, Al Rajhi said.