Saudi Arabian's Arabian Cement Co will launch its first plant abroad next year to boost capacity but hold off further expansion until the global turmoil is over, its chief executive officer said. The Jordan-based plant is currently under construction and will have an annual production capacity of 2 million tons by the first quarter of next year, Muhammad Uthman told Reuters in an interview.
"We expect production early next year with 5,000 tons per day capacity," he said, adding actual production would be around 1-1.5 million tons depending on demand. For this year Arabian Cement plans to increase production by 36 percent to 3.5 million tons after enlarging its Saudi-based factory in Rabigh, increasing daily capacity by 7,000 tons. Plans for further expansion in the Middle East and North Africa are suspended until global market stabilises and the effects of the global financial crisis are clearer, said Uthman.
Saudi Arabia, where multi-billion dollar infrastructure projects are under way, faced a cement shortage in the local market last year as companies exported large quantities abroad, causing local prices to soar and leading to a government ban on exports.
The ban, coinciding with an increase in production facilities, has caused an oversupply in the local market that drove cement prices down. "Now there are around 8 million tons of clinker stored in Saudi Arabia's 12 cement companies. This is a huge quantity and will be very hard to sell in the coming few years," said Uthman.
The kingdom's total cement output capacity is expected to exceed 55 million tons within the next two years as existing companies expand and new producers enter the market. Demand would get no boost from industrial projects, worth more than $400 billion, that Saudi Arabia was planning to diversify its economy with. "By no means will new projects in Saudi match this increase in capacity," he said.