Cement markets in MENA are expected to enjoy a solid year in 2013 with a positive outlook for 2014. Overall, IA Cement Ltd expects demand growth of 3 – 4% for the region as a whole in 2013, with an improvement to 4 – 5% in 2014. There are a number of very strong markets growing at or close to double-digit – Saudi Arabia, Iraq, Libya and Algeria. Clinker supplies have generally tightened due to strong demand in North and West Africa, as well as imports to Saudi Arabia. This has helped Southern European cement producers to increase exports, easing their troubles in the wake of the eurozone crisis.
The total MENA cement market will reach 300 million t in 2013, on IA Cement’s estimates. This is equivalent to 7.5% of the global cement market, and is broken down into 190 million t for the Middle East and 110 million t for North Africa.
Markets in the Gulf are generally enjoying robust cement demand growth, boosted by high oil prices and strong infrastructure spending by governments keen to avoid any further social unrest. Overall, cement consumption in the region is expected to grow by more than 4% this year.
Double-digit growth in cement demand is predicted for Iraq and Saudi Arabia in 2013, with solid growth also in Oman and Qatar.
Demand in Saudi Arabia has been very strong in recent years. The prevalent cement shortages of the last 18 months have been largely resolved with imports. In April 2013, the King of Saudi Arabia announced the importation of 10 million t of cement to alleviate chronic shortages. Plans were also announced for 3 – 4 new cement plants to be built in the next three years, with grants of US$800 million towards these projects. Since the royal decree, IA Cement expects imports to surpass 0.5 million t as this article goes to print. With very low cement prices in Saudi Arabia (SAR240/t or US$64/t), the government provides the cement companies with subsidies to cover the additional costs of import. Several major infrastructure projects are underway alongside the government programme to build 0.5 million new homes.
In Iraq, the rebuild process continues and this is gradually luring foreign investors back to the market. Cement demand is growing at close to double-digit levels. The cement industry has become more competitive following rising imports from Iran combined with higher local capacity. In June 2013, Iraq announced it would stop imports from 1 July, although it appears these were resumed after prices on imported cement were increased. The market is expected to continue to need more than 5 million tpa of imports in the medium-term. A number of overseas companies, including Lucky Cement, Attock Cement and ASEC, have announced plans to enter the cement industry in Iraq.
IA Cement expects sanctions to affect the cement market in Iran this year, with a decline in demand. Capacity continues to grow, and as such the pressure to export more cement has increased exponentially. Iranian exporters currently offer the lowest prices in the region, although sanctions make it difficult to carry out trading. Exports were up more than 40% to reach 8 million t in the period of March – August 2013.
In Lebanon, despite the close proximity to Syria, the cement market has held up remarkably well and is likely to post a healthy growth rate of 3 – 4% in 2013. Demand is likely to settle at around 5.4 million t in 2013, which will be relatively close to 2011 levels. Construction has been underpinned by a catch-up effect in recent years, but this backlog is now nearing completion. In the medium-term, demand growth is likely to be rather muted. Syria continues to suffer sharp declines in cement demand. Although difficult to corroborate, consumption is estimated to have fallen from a peak of over 8 million t to less than 4 million t for 2013. Imports have largely stopped as the collapse (and extreme volatility) of the exchange rate has made these largely unviable.
Cement demand in the UAE has fallen by over 40% from peak levels since the real estate bubble burst. However, a modest growth in volumes is expected in 2013 from a very low base. Unfortunately, cement capacity continues to rise, increasing the size of the UAE cement surplus. The property market in Dubai is making a strong comeback, with prices up by more than 20% in the last twelve months. As a result, a number of high profile tourism and real estate projects are being considered for reactivation. The country has also strongly benefitted from the Arab Spring due to its safe-haven status.
In smaller markets, demand in Qatar is robust but has not yet lived up to expectations in the run-up to the 2022 FIFA World Cup. Oman is also enjoying healthy demand from all segments, and is expected to enjoy another year of solid growth. Government spending is set to rise almost 30% this year. It will also face less pressure from UAE exports, as these have been diverted in part to Saudi Arabia. Bahrain remains rather depressed due to unrest, and the market was flat in the first half of 2013. Kuwait has remained lacklustre due to the absence of large scale projects and lack of investment in infrastructure and development projects. Overall, the cement demand has remained in the range of 4.5 – 5.5 million t in the past five years and production has remained in the range of 2 – 2.5 million t.
Part 1 of 2. Read Part 2 here.
Written by Imran Akram, IA Cement Ltd, UK. This is an abridged version of the full article, which appeared in the November 2013 issue of World Cement. Subscribers can view the full article by logging in.
Read the article online at: https://www.worldcement.com/africa-middle-east/24102013/mena_market_trends_part_1_335/