It also noted that Saudi Arabia and UAE will likely remain the main drivers for growth and the largest construction markets in the region. “Saudi Arabia and the UAE (Abu Dhabi) are to be the main drivers, with 69 percent of the total of $ 208 billion in awards for 2010.”
The brokerage expects the two countries getting new contracts of about $ 79 billion and $ 64 billion respectively in 2010.
Saudi Arabia emerged as an important construction market in the GCC in 2009, with new construction awards up from $ 16.2 billion in 2008 to $ 46.7 billion in 2009 and an increase in cement demand of 23 percent to 37mt.
For 2010, “we expect that oversupply will remain an issue for the UAE, where we expect a utilization rate of less than 50 percent, whereas in Saudi Arabia we expect the utilization rate to drop marginally from 87 percent in 2009 to 83 percent in 2010.
“We expect Kuwait and Qatar to remain net importers of cement in 2010, but pricing in Oman could be under pressure as a result of cement imports from neighboring countries.”
Sector-wise, the oil & gas and power would dominate the market for new awards, with a combined 57 percent share in 2010.Saudi Arabia witnessed a strong 23 percent y-o-y increase in local cement demand for 2009.
Cement exports from Saudi Arabia, however, declined 57 percent y-o-y and went from 8.7 percent of total production in 2008 to 3.2 percent in 2009, as a result of an export ban. But the rise in local demand more than compensated for this fall in cement exports as total cement sales (local deliveries + exports) increased 16 percent y-o-y in 2009. January-February 2010 also saw a sharp 25.6 percent y-o-y increase in sales, driven by an increase in local demand as well as a 68.5 percent y-o-y rise in exports.
Credit Suisse named Orascom Construction Industries, El Sewedy Cables and Saudi Yamama Cement Co as its preferred stocks in the segment.
It said as infrastructure accounts for 60 percent of Orascom’s construction backlog, it saw the company as a good way to get exposure in the sector.
