BMI notes that our positive growth forecast for the Saudi Arabian port of Dammam, which we have maintained in spite of a year-on-year decline in tonnage volumes over the first four months of the year, is being supported by a shortage of cement in the Kingdom. The infrastructure boom has led to demand for the construction material outstripping domestic supply, with a resultant need to import considerable volumes. This could boost tonnage volumes at Saudi Arabian ports even more than our forecasts currently account for.
There is considerable demand growth for cement in Saudi Arabia as the sharp acceleration in construction contracts awarded over 2011 feeds through to activity on the ground. We expect that demand will only expand, as 2012 saw another strong year for project awards, with the National Commercial Bank registering SAR235bn in construction contract awards, the majority of which should enter construction over a 12- to 24-month timeframe. A healthy project pipeline implies another solid year for contract awards in 2013 is likely. In light of a sustained high level of contract awards over the past 24 months, especially in the energy sector, and renewed commitment to large-scale housing programmes by the government, our Infrastructure desk has increased our headline construction growth forecast to 10.4% for 2013 and 9.4% for 2014.
|Cementing The Growth Outlook|
|Port of Dammam Throughput, 2008-2017 ('000 tonnes)|
This growth in demand for cement has outstripped what the domestic Saudi Arabian industry is capable of producing, and this has led to a decree by King Abdullah to import over 10mn tonnes of the material. This has already been taking effect, with considerable shipments of 350,000 tonnes having come in over the past week. Musaid al-Darees, spokesperson for the Saudi Port Authority, said: 'Shipments have come through Dammam, Jeddah and Jazan ports, some through Yanbu and some others are scheduled to arrive through Jubail and Dammam ports.' This cement is coming for the most part from the UAE, with smaller volumes from Egypt.
BMI notes that these cement imports support our tonnage growth forecasts, in particular for the Red Sea port of Dammam, which appears to have been taking the bulk of the imports so far. Total tonnage volumes handled at Dammam over the first four months of the year have seen a year-on-year decline, dropping by 0.2%. However, we have maintained a positive outlook over the year, forecasting growth of 5.8%. This is predicated on the annualised outlook, and the macroeconomic situation on the ground; we believe economic growth in Saudi Arabia, in particular in non-oil industries, should be sufficient to boost volumes over the remainder of the year. Key projects that are part of the stimulus package, such as the building of many thousands of new homes, and the economic cities that are springing up over the country, should support this, and the cement shortage is one instance of how this will support growth at Saudi Arabian ports.