Building material prices surge in Saudi Arabia

The increase in prices for materials comes as construction activity increased in Q1, according to a new report by real estate consultancy firm JLL. (Supplied)
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Updated 14 May 2021

Building material prices surge in Saudi Arabia

  • While steel made the biggest surge, the growth slowed as the year progressed, going from 40% to 28% in March

RIYADH: The price of building materials, especially steel, rose in the first quarter (Q1) of this year, as construction activity began to recover from the slowdown caused by the coronavirus disease pandemic last year.

The price of steel surged to SR3,514.73 ($937.26) per ton in Q1 of 2021, a 33 percent increase year-on-year and the highest price since 2008, according to the latest data from the General Authority for Statistics (GASTAT).

The cost of ready-mix concrete rose 14 percent year-on-year to SR203.9 per cubic meter during the same timeframe, while cables rose 21 percent year-on-year to SR38.33 per meter.

In addition, wood prices rose 15 percent year-on-year to SR3,067.49 and cement was up 5 percent to SR14.03 per 50kg bag in Q1.

While steel made the biggest surge, the growth slowed as the year progressed, going from 40 percent growth in January to 28 percent growth in March.

The increase in prices for materials comes as construction activity increased in Q1, according to a new report by real estate consultancy firm JLL.

“From a supply perspective, the first quarter recorded an increase in construction activity,” the JLL report said. According to its figures, in the residential sector in Riyadh 7,700 units were handed over in Q1, bringing the total to 1.3 million units in the capital. In Jeddah, around 2,000 units were added, bringing the total to 838,000 units.

The report estimated that 36,000 units in Riyadh and 12,000 units in Jeddah are due to be delivered this year.

FASTFACT

The report estimated that 36,000 units in Riyadh and 12,000 units in Jeddah are due to be delivered this year.

In addition to the increased activity in the residential sector, Riyadh is also set to see an additional 386,000 square meters of office space, 240 square meters of retail space and 2,800 new hotels rooms built this year.

In Jeddah, the city is forecast to gain an additional 43,000 square meters of office space, 200,000 square meters of retail space and 2,700 new hotel rooms.

However, JLL said that while it remained “cautious about the timely delivery of future projects” it believed that going forward “the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand.”

Announced in January this year by Crown Prince Mohammed bin Salman, the ambitious Riyadh Strategy 2030 aims to create 35,000 new jobs for Saudi nationals, pump up to SR70 billion into the national economy and double the size of the capital city’s population to as many as 20 million by 2030.

The increased development in the first quarter is a welcome change from 2020, when construction activity declined in the wake of restrictions due to the pandemic.

According to the Contract Awards Index produced by the US-Saudi Business Council (USSBC), the total value of construction contracts awarded in Saudi Arabia during the third quarter of 2020 declined by 84 percent year-on-year.

However, Albara’a Alwazir, an economist at the USSBC, told Arab News that he was confident the sector would rebound, just as it had done after the downturn between 2016 and 2018. “While numerous projects have been delayed because of the pandemic, the government has stated that there will be a continued focus on megaprojects especially those that relate to Vision 2030,” he added.

This was already evident in the USSBC’s Q4 report, which found that the total value of contracts rose 115 percent quarter-on-quarter in the last three months of 2020.


Sterling set for worst week since Sept. 2020

Updated 19 June 2021

Sterling set for worst week since Sept. 2020

LONDON: Sterling extended its fall against the US dollar on Friday, dropping below $1.39, hurt by the US Federal Reserve’s hawkish surprise and an unexpected fall in Britain’s retail sales.
The pound dropped against a strengthening dollar on Thursday after the Fed surprised markets by signaling it would raise interest rates and end emergency bond-buying sooner than expected.
On Friday, it fell further against both the dollar and the euro. It was down 0.3 percent on the day at $1.389, having touched as low as $1.38555 — its weakest since May 4. It was on track for its worst week since September 2020.
Versus the euro, it was down around 0.3 percent at 85.78 pence per euro, on track for a small weekly fall.
“GBPUSD remains bogged down below the 1.39 handle by a confluence of broad USD strength and a slight deterioration in near-term data,” said Simon Harvey, senior FX market analyst at Monex Europe.
“The limited impact of the data on sterling is largely because retail sales volumes remain above pre-pandemic levels and a shift in consumption patterns toward services after the May 17th reopening was always likely.”
For cable, market participants are weighing up the Bank of England and the Fed’s relative pace of possible monetary policy tightening. The BoE next meets on June 24.
BofA strategists said in a note to clients that it changed its view on the central bank’s tightening trajectory.
and now expects a 15 basis point rate hike in May 2022, compared to previously expecting no hikes in 2022.
“Brussels’ patience with London’s having its cake and eating it is wearing thin. Indeed, there is a risk of protocols being triggered and tariffs being threatened more seriously,” wrote ING strategists in a note to clients.
“The next few weeks could thus be a vulnerable period for Cable, where a break of 1.3890 opens up 1.3800/3810 — the last stop before an extension to the March/April lows of 1.3675.”


Bahrain’s Batelco could be first stock to be dual listed on Tadawul

Updated 18 June 2021

Bahrain’s Batelco could be first stock to be dual listed on Tadawul

  • Samba has been hired as an adviser on the deal

RIYADH: Bahrain Telecommunications Co. (Batelco) is planning to become the first company to have a dual listing of shares on Saudi Arabia’s stock exchange (Tadawul), Bloomberg reported citing people familiar with the matter.

The investment arm of Samba Financial Group has been hired as an adviser on the deal, the people said, asking not to be identified for information privacy.

No decision has been made and the company may decide against the dual listing, they said.

A spokesperson at Batelco declined to comment, while Samba Capital didn’t respond to messages seeking comment, Bloomberg said.

Tadawul has been trying to encourage Middle Eastern firms to dual list for years, without success. Aluminium Bahrain had considered a dual listing in 2014, but it never occurred.


Saudi Arabia’s National Debt Management Center wins global awards for second year

Updated 18 June 2021

Saudi Arabia’s National Debt Management Center wins global awards for second year

  • Saudi office won Middle East and emerging market awards

RIYADH: Saudi Arabia won the Best Sovereign Public Debt Office in the Middle East and the Most Impressive Emerging Market Issuer Award at the 2021 Global Capital Bond Awards, for the year 2021, for the second year in a row, SPA reported.

The Global Capital Bond Awards honors the achievements of governments and companies of all sizes in the field of sovereign and regional finance, banking services, hedge funds, and many other areas within the financial services sector.

It also highlights the most prominent innovations and achievements within the financial services sector, globally.

Saudi Arabia sold SR8.27 billion ($2.20 billion) of riyal-denominated sukuk in June, up from $941 million in May, bunt down from $3.1 billion April, National Debt Management Center data show.

“Driving growth of the Kingdom’s capital markets will be an increase in bond issuance to help fund the SR12 trillion Vision 2030," said Khalid Al-Bihlal, head of S&P Global Ratings KSA. "We project a gradual rise in the use of Saudi Arabian riyal-denominated bond issuance as the local capital markets develop. The US dollar is currently the currency of choice for such bonds."


Saudi MoF electronically linked to SAMA

Updated 18 June 2021

Saudi MoF electronically linked to SAMA

RIYADH: The Saudi Central Bank (SAMA) announced the completion of an electronic link with the Ministry of Finance to process requests relating to the bank accounts of government agencies held at Saudi commercial banks through the online portal Hesaab.

SAMA is seeking to improve and accelerate the procedures related to requests of government agencies’ bank accounts received from the Ministry of Finance, by implementing technical solutions with minimal human intervention, it said in a statement on Thursday.

The Hesaab portal is one of the National Transformation Program 2020 initiatives that improves the level of financial services, in line with Vision 2030.


Oil falls amid dollar strength; demand picture still bullish

Updated 18 June 2021

Oil falls amid dollar strength; demand picture still bullish

  • Prices remain close to multi-year highs
  • Dollar jumped since Fed moved rate-hike forecast forward

LONDON: Oil prices fell for a second straight session on Friday as the US dollar soared on the prospect of interest rate hikes in the United States, but they were on track to finish the week little changed and only slightly off multi-year highs.
Brent crude futures were down 64 cents, or 0.9 percent, at $72.44 a barrel as of 9:00 a.m. GMT, extending a 1.8 percent decline on Thursday. The contract is set to be largely steady for the week.
US West Texas Intermediate (WTI) crude futures were down 53 cents, or 0.8 percent, at $70.51 a barrel, after retreating 1.5 percent on Thursday and is also set to be flat on the week.
On Wednesday, Brent settled at its highest price since April 2019 while WTI settled at its highest since October 2018.
“Oil markets retreated sharply overnight as a stronger US dollar and falling commodity prices elsewhere saw the overbought technical correction continue,” said Jeffrey Halley, senior market analyst at OANDA.
The dollar has rocketed in the two sessions since the US Federal Reserve projected possible rate hikes in 2023, earlier than market watchers previously expected. A rising dollar makes oil more expensive in other currencies, curbing demand.
The prospect of rate hikes also weighed on the longer-term growth outlook, which would eventually hurt oil demand, in contrast to the near-term outlook for growth in demand as COVID-19 related curbs on movement and business activity ease and road and air travel pick up, said Westpac senior economist Justin Smirk.
“The near term’s all very positive. The question is how much further can it rise, how much scope is there if you’re looking at an environment where interest rates are going to rise,” Smirk said.
Oil prices also fell after Britain on Thursday reported its biggest daily rise in new cases of COVID-19 since Feb. 19, with government figures showing 11,007 new infections versus 9,055 a day earlier.
Adding to negative sentiment were remarks from Iran’s top negotiator on Thursday saying talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement.