The burgeoning building materials market in Saudi Arabia is projected to grow at an annual rate of 7 per cent, reaching a value of SR700 billion ($186 billion) by 2030, according to the Saudi Arabian General Investment Authority (SAGIA).

Total spending in this large market over the past five years has exceeded SR1.12 trillion ($300 billion) and in 2017 spending hit an unprecedented SR270 billion ($72 billion), SAGIA said in a report.

Saudi Arabia’s growing demand for building materials is primarily being driven by the dynamics of the kingdom’s booming construction sector which is seeing heightened activity due to the multiple development projects that are taking place throughout the kingdom.

Saudi Arabia’s booming construction sector drives the kingdom’s building materials market

Large-scale projects, including NEOM city, the Red Sea project and Vision 2030’s goal to build one million new residential units, are among the biggest drivers of demand growth in the building material industry. The construction of these megaprojects is driving an urgent and growing need for building materials to meet construction demands and break the record of consumption rates of cement, ceramics, stone and glass.

Saudi Arabia’s rigorous construction programs makes the kingdom the leading consumer of building materials in the region. The cement market alone has reached SR30 billion ($7.9 billion), accounting for 53 million tonnes in 2016 and 1.5 per cent of total world consumption. Ceramics also reached a SR5.6 billion ($1.5 billion) local demand, primarily driven by the need for tiles (70 per cent) and sanitary ware (20 per cent). Further, stones market is valued at SR3.75 billion ($1.0 billion), whilst the glass market size is worth SR 1.875 billion ($0.5 billion), SAGIA revealed in the report.

Untapped potential

While the majority of building materials are imported currently, Saudi Arabia is committed to exploiting the untapped potential of substituting imports with locally produced goods. Businesses that take on ventures to service the kingdom’s building material sector can also look forward to capitalising on export potential to growing GCC markets, it said.

Saudi Arabia is currently importing massive amounts of building materials to satisfy its large-scale construction program. Despite the kingdom’s heavy reliance on imports, there exists considerable potential for import substitution for a wide range of building material.

For example, in 2016, marble made up a 90 per cent import share of local demand, with total expenditure reaching SR1.2 billion ($320 million). Although Marble deposits are abundant in the kingdom, the natural stone is mostly imported due to the lack of local resources. In the same year, tiles also had a high share of imports (70 per cent) as a percentage of local demand, with total local expenditure of SR4.12 billion ($1.1 billon)

growing markets

According to SAGIA, the GCC construction market reached SR600 billion ($160 billion) in 2017 and is expected to grow at a rate of 10 per cent over the next five years. “With its strategic location, close proximity to neighbouring countries and world-class infrastructure, players in Saudi Arabia have the opportunity to tap into the large and growing GCC construction market,” it said.

In 2016, Saudi Arabian businesses exported large quantities of ceramics and glass within the GCC, amounting to SR262 million ($70 million) worth of ceramics and SR500 million ($133 million) worth and glass, SAGIA revealed.

“As the kingdom begins to exploit the untapped potential of its domestic building material resources, significant export potential exists to satisfy the growing demand from neighbouring markets,” it said.

ecosystem

Further, the report stated that Saudi Arabia’s building material sector also benefits from a well-developed ecosystem comprising of a sweeping transportation network, a robust financing system, innovative R&D teams and a strong pool of talent.

The kingdom’s ports and roads are well-developed and subject to significant improvement programs, allowing for the seamless transportation of building materials within the kingdom and throughout regional markets.

 In terms of financing, investors seeking to build cement production facilities already have access to loans of up to 75 per cent with repayment plans of up to 20 years.

In terms of R&D and innovation, the kingdom’s leading universities have established strong research centres with an active focus on building materials, such as the Center of Excellence for Concrete Research and Testing at KSU and the Center for Engineering Research at KFUPM. Furthermore, some private sector players have established several research centres to boost the development of sector.

“With demand set to continuously increase, the kingdom is preparing to release the untapped potential of its local resources and is welcoming proposals from accomplished investors interested in facilitating this process,” the report concluded.