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Saudi construction growth to be slow through 2017

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World Cement,

Growth in the Saudi Arabian construction sector will be “slow and painful” through 2017, according to a new report from BMI Research, following a contraction in 2016. Growth is forecast at 1.9% year on year to an industry value of SAR172.01 billion (US$45.9 billion), following a contraction of 2.61% in 2016.

“We are maintaining our forecast for weak growth in the Saudi construction sector over for 2017, after official date was revised downwards for the industry’s growth in 2015 and 3Q16 data confirms that the industry will have fallen into recession over 2016,” BMI Research said.

Growth will be based on the gradual resumption of payments by the government to construction companies, although this will be undermined by an economy that is forecast to tip into recession in 2017.

The industry will strengthen in 2018, according to BMI Research, on the back of increased contract activity – with the Mecca Metro the “most widely anticipated project”.

The downturn in the construction sector is hitting the Saudi cement industry hard. Based on data from 16 listed cement companies, financial news site Argaam calculated an overall 15.7% fall in cement sales in January 2017. Only three of the 16 registered growth: City Cement (up 22.41%), Jouf Cement (up 2.48%) and Yanbu Cement (up 0.48%).

With the exception of QACCO (down 8%), the remaining companies all experienced double-digit falls in sales, including a 56.02% fall from Northern Cement, a 45.96% fall from Hail Cement and a 43.5% fall from Najran Cement.

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