Saudi cement firms face fuel shortages
Riyadh, October 27, 2011
A shortage in subsidised fuel is threatening growth among Saudi cement firms amid rising demand in the top oil-exporter, the chief executive of Southern Province Cement Co (SPCC) said.
Safar Dhufayer, speaking at the Reuters Middle East Investment Summit in Riyadh, said his firm, the Gulf country's biggest cement producer by market value, may delay the launch of a new line expected to raise its production capacity due to the fuel shortage.
"Our new line under construction should be commissioned by the end of this year, but if there is not enough fuel we will not run it and that will create more pressure from rising demand which we cannot meet," Dhufayer said. "We only receive 80 percent of the fuel we need."
Demand for cement in the biggest Arab economy is seen at 48 million tonnes in 2011, increasing to up to 52 million by 2013, while supply is 55 million tonnes this year and plans for growth are uncertain, Dhufayer said.
"Maybe we will have a shortage in 2013 and 2014 if we don't have expansion of new plants, but that depends on fuel. We cannot think of new lines without guarantees from Aramco about fuel," he said.
Cement companies in Saudi Arabia have a competitive advantage over global rivals as they benefit from subsidised fuel, supplied by government-owned Saudi Aramco. But firms complain they are not getting enough of the prized commodity.
"Aramco is the only supplier of fuel for the whole industry ... If they don't give us enough fuel we will reduce the production of cement and this will hurt the market," Dhufayer said.
Saudi Aramco had said in remarks to the local press in July that cement firms in Saudi Arabia are receiving sufficient fuel to cover their existing production capacities.
Cement firms in Saudi Arabia, which is spending over $400 billion on infrastructure projects and is planning to build 500,000 new homes, faced a cement shortage in the market in 2008 that led to a ban on exports. The ban is still in effect.
Despite the shortage in fuel supply and an export ban on cement makers, SPCC is still optimistic that change is around the corner and is planning to export some of its supply by the end of next year.
SPCC, which has three plants in the kingdom and a market share of 15 to 16 percent, is planning to export some of its supply -- up to 6.3 million tonnes daily if the new line is added -- on hopes that the government will soon lift the export ban.
"Maybe next year ... by the end of 2012. We have contracts with European countries like Spain and we can export to Yemen and North Africa because we have an arrangement with Jizan port which can facilitate the export," he said. - Reuters