Cement is an essential ingredient of the construction industry; it is used in a broad range of construction activities. Applications of cement include commercial construction, residential construction, and infrastructure development.
Infrastructure development accounted for the largest market share of the cement market in the Kingdom, both in terms of volume and revenue in 2013. In terms of volume, the segment accounted for more than 50% share of the cement market in the Kingdom of Saudi Arabia, in 2013. Cement used in the construction of residential units was the third-largest application segment in the Kingdom of Saudi Arabia in 2013. The cement industry in the Kingdom exhibits a high degree of backward and forward integration, since most cement producers are also engaged in its downstream and upstream activities. This high level of integration provides these companies with a distinctive competitive advantage in terms of feedstock supply and market presence.
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Demand for cement in the Kingdom is primarily driven by the expanding construction industry in the region which accounted for over 50% of the share in 2013. The government has undertaken several infrastructure development projects across the Kingdom as part of the Ninth Development Plan. High investment in infrastructure development activities is anticipated to be a major demand driver for cement in the Kingdom. The government allocated a major portion of these funds for the construction of residential and commercial structures. This includes health cities and residential units in several regions across the Kingdom. The decision to build six economic cities across the Kingdom is also likely to boost demand for cement in the Kingdom. Growth in population coupled with the influx of foreign immigrants is further anticipated to propel demand for new residential units, thereby driving demand for cement.
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Saudi Aramco supplies subsidized fuel to cement companies in the Kingdom as part of an agreement with the government. Thus, the production cost of cement in the Kingdom is one of the lowest as compared to that in the neighboring GCC countries, due to abundance of raw materials and availability of fuel at subsidized rates. Growth of the cement market in the Kingdom is estimated to be hampered by government regulations and supply of subsidized fuel. Production of cement is one of the most energy intensive processes. The government provides cement companies with subsidized fuel; however, this supply of subsidized fuel could be altered with a change in the government’s priorities.
In terms of demand, the central and the western regions were the dominant markets for cement in the Kingdom of Saudi Arabia in 2013. Together, these regions accounted for a majority share of total demand for cement in the Kingdom. Eastern and southern regions followed the central and western regions as the major markets for cement consumption. Leading cement manufacturers in the Kingdom concentrate on expanding their capacities to cater to the rising demand for cement in the region. Therefore, growth in the construction sector, especially infrastructure development, is projected to drive demand for cement in the Kingdom of Saudi Arabia in the next few years.
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Of late, industry participants in the Kingdom have increased their production capacities. This is in line with the rising demand for cement, particularly in the central and western regions of the Kingdom. Key players operating in the cement market include Saudi Cement Company, Yamama Cement Company, Najran Cement Company, and Riyadh Cement Company.
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