Saudi Arabia Considers Adjusting Cement Price Cap in Response to Fuel Price Increase
Following a hike in fuel prices, Saudi Arabia's Ministry of Commerce is contemplating either raising or completely removing the current cement price cap of 240 Saudi riyals per tonne.
Saudi Arabia's Ministry of Commerce is reportedly considering a change in the cement price cap in response to the recent increase in fuel prices, effective from January 1, 2024. According to a report by Riyad Capital, the ministry may either raise the current price cap, which stands at 240 Saudi riyals per tonne (approximately $64/tonne), or remove it altogether.
This consideration comes as cement companies in Saudi Arabia are already facing challenges due to lower demand and prices. The situation could be further exacerbated by higher energy costs. Saudi Aramco has notified several petrochemical and cement companies about the increase in prices of certain feedstocks and fuel products, marking the first such increase since 2016.
For cement companies, the price of HFO380 (Heavy Fuel Oil) is expected to have risen from SAR 3.8 per barrel to SAR 8.3 per barrel, and the Arab light price from SAR 6.35 per barrel to SAR 14.9 per barrel. Aljazira Capital, in a recent report, anticipates that higher feedstock costs will have a combined negative impact of SAR 3.5 billion ($933 million) on petrochemical companies, with a gross profit margin contraction in the range of 140-300 basis points.
Source:
Zawya
