RIYADH, 24 March 2005 — A soon-to-be established Saudi cement firm plans to build a new multimillion dollar factory to help feed the Kingdom’s oil-driven construction boom, one of the company’s founding directors told Reuters.
The Riyadh Cement Company (RCC) is due on Monday to sign a $170 million turnkey contract with China’s Sinoma to construct a 1.6 million ton per year clinker in the capital Riyadh, RCC executive committee member Nasser Akeel said. The total cost of the project will be SR1.1 billion ($293.3 million), and the plant is due to start production within 26 months.
Demand for cement is now high in Saudi Arabia. Buoyed by record oil revenues, the government is spending heavily on new infrastructure projects including roads, schools and other buildings.
Saudi Arabia’s National Commercial Bank (NCB) said domestic consumption of Portland cement has grown by 11.6 percent a year since 2000, reaching around 25 million tons in 2004. But the Kingdom’s eight listed cement firms currently only produce 23 million tons a year. “We set up the company because we saw demand for cement is higher than the supply. It’s as simple as that,” said Akeel. “Our projection is there will be a shortage of supply until maybe 2008.” He said RCC is due to be officially registered within 10 days and will find no problem finding customers.
“The country’s population is growing fast, so they will all need housing and infrastructure,” Akeel said. “There is only one cement plant in the central region, and it does not cover the demand from the area.”
He said RCC would concentrate on the local market, but could one day begin exporting abroad. “Neighboring countries are conducting huge construction projects, and I don’t think their cement plants are covering the demand.”
NCB said the net profits for the cement sector rose to SR2.91 billion in 2004 from SR2.43 billion the year before.
Saudi Arabia has issued eight more licenses for the establishment of cement factories with a combined capacity of 14 million tons. But Akeel doubts there is enough room for that many new plants. “I think the market can accommodate another factory in the western region. More than that, it would be surplus,” he said. “I think a lot of people with the licenses are not going to go ahead and build plants.”
RCC’s SR550 million paid-up capital is split into 11 million shares of SR50 each, owned by a group of companies and business figures. Akeel expects added interest in his firm when it launches a public share offering within two years.
“There is a huge amount of money going into the (Saudi) stock market. But it’s unpredictable, so people are looking to invest their money in industries with a more solid foundation,” he said.