Saudi Arabia and China Direct: Financial Relations and Impact on Hail Cement

The relationship between Saudi Arabia and China is one of the most strategically developed economic partnerships in the last two decades. In the financial context, the term "Saudi Arabia and China Direct" refers to direct trade and investment transactions between the two governments and major companies, without the need for international intermediaries or third currencies like the US dollar. This represents a qualitative leap in the nature of cooperation between the two countries, as Saudi Arabia seeks to diversify its economy and develop its infrastructure under Vision 2030, while China considers Saudi Arabia a pivotal partner in the Belt and Road Initiative and supports energy supply security.

This trend has been reflected in a series of agreements signed between the two central banks, currency swap deals, and facilitating trade in riyals and yuan. Saudi Arabia has also launched direct flights to Chinese cities and joint projects in energy and infrastructure, enhancing the liquidity of trade exchanges and the speed of transaction execution.

In the financial market, the direct relationship also means increased opportunities for mutual investment, as Chinese investment funds can enter the Saudi market more easily, and vice versa. This is evident in the participation of Chinese investors in major IPOs and Saudi investments in Chinese bonds and assets to support its reserves and diversify income sources.

Saudi-Chinese relations witnessed a significant growth in trade volume in 2024, with Saudi oil exports to China exceeding $50 billion, while Saudi imports from Chinese products reached approximately $6-7 billion, according to the latest statistics. Oil products are no longer the sole focus of cooperation; the list has expanded to include petrochemicals, metals, food products, and industrial equipment.

On the investment side, several government and private entities announced joint projects worth over $20 billion in renewable energy, oil, gas, and technology sectors. Agreements for currency swaps have also been signed, allowing direct exchanges without the need for the dollar, reducing operational costs and increasing transaction flexibility.

During the first half of 2025, economic indicators between the two countries continued to rise, especially with an increase in oil exports by about 10-15% year-on-year and growth in Chinese exports in advanced industries. This growth reflects both parties' desire to deepen financial relations through major projects and mutual investment deals, including the development of advanced infrastructure, joint industrial complexes, and enhancing tourism and cultural exchanges.

Hail Cement Company (symbol: 3001) is one of the leading companies in the Saudi cement sector, established in 1975 and based in the Hail region. The company offers a wide range of Portland cement and clinker products, targeting both local and international markets.

By mid-2025, the share price reached approximately 41 riyals, with an estimated market capitalization ranging between 4-5 billion riyals. The company's price-to-earnings ratio is moderate at 10-12 times, indicating a balanced market valuation compared to its actual profitability. Cash distributions reached 3.0 riyals per share in 2024, reflecting an attractive dividend yield of about 7% annually.

Hail Cement is characterized by good financial solvency and relative stability in revenues and profits, despite seasonal fluctuations in demand and rising transportation and energy costs. The company also invests in periodic expansions to enhance production capacity, with trends to improve operational efficiency through the use of modern equipment, often sourced from China. This technological integration enhances the company's competitiveness in both local and regional markets.

The Saudi cement sector is considered a vital sector closely linked to construction, real estate development, and infrastructure projects. The sector is currently experiencing a degree of saturation due to the increase in the number of factories, yet opportunities remain thanks to massive government projects such as NEOM, Qiddiya, and new educational and healthcare facilities.

Competition includes major companies such as Yamama Cement, City Cement, Southern Cement, and Umm Al-Qura Cement, in addition to medium-sized companies like Hail Cement. Competition is focused on government contracts and supplying cement for private sector projects.

On the other hand, there is currently no direct Chinese cement factory in Saudi Arabia, but the Chinese influence is evident through the import of industrial equipment, technical consultations, and raw materials. Additionally, cooperation between Saudi Arabia and China may expand to include exporting cement or clinker to Asian markets in the future, especially if new trade agreements are reached within the Belt and Road Initiative.

Although Hail Cement primarily relies on the local market, Saudi-Chinese relations indirectly impact its financial performance. First, any increase in Chinese demand for oil raises Saudi government revenues, thereby increasing spending on construction and infrastructure projects, which boosts demand for cement.

Second, stability in global energy prices due to stable relations with China mitigates operational cost fluctuations for cement companies. Third, technical cooperation with Chinese companies in updating production lines contributes to increasing Hail Cement's efficiency and reducing operational costs.

Conversely, economic changes in China (such as slowdowns or crises) may affect global oil and raw material prices, impacting production costs and the company's profitability. However, local Saudi demand remains the primary driver of Hail Cement's revenues, with future export opportunities enhancing income sources should cooperation with China expand.

China has indirectly contributed to the development of the Saudi cement sector by exporting modern industrial equipment, automated control systems, and advanced kilns used in cement factories. Companies like Hail Cement have benefited from these technologies, importing Chinese production lines and equipment that have helped improve manufacturing efficiency, reduce energy consumption, and enhance the quality of the final product.

Modern cement factories rely on technological solutions to control pollution, optimize consumption, and reduce carbon footprints. China is a leader in developing low-carbon cement, which Saudi companies have begun to import as part of the Kingdom's efforts to reduce emissions and achieve sustainability goals.

Additionally, Chinese companies provide additives and special chemicals used in producing advanced types of cement, giving Saudi companies greater flexibility in meeting diverse construction project requirements. This technological integration enhances Hail Cement's ability to compete locally and regionally.

The financial results of Hail Cement Company have shown remarkable stability in revenues and profits since the beginning of 2024, despite some seasonal fluctuations related to construction projects. The share price of Hail Cement reached approximately 41 riyals by mid-2025, with a market value between 4 and 5 billion riyals.

The company's price-to-earnings ratio is moderate between 10 and 12 times, reflecting market confidence in its ability to achieve sustainable profits. Annual cash distributions reached 3 riyals per share, yielding an annual dividend return of about 7%. This performance attracts the interest of investors seeking stable income from the industrial sector.

In terms of revenues, the company continued to implement expansion and efficiency-raising programs, benefiting from stable energy prices and raw material costs. The company maintained good financial solvency and recorded positive net profits despite challenges related to transportation costs and rising fuel prices. These indicators reflect the company's strong financial position in the face of market changes.

The Saudi government aims to enhance its non-oil exports under Vision 2030, and the Chinese Belt and Road Initiative presents a golden opportunity for cement companies like Hail Cement to open new markets in Asia and Africa. So far, the company has not exported large quantities to China, but with the signing of new trade agreements and the expansion of land and maritime transport routes, opportunities for exporting clinker and cement to Asian markets are emerging.

Among the main challenges facing exports are high shipping costs, competition with local producers in target markets (especially China, which is the largest producer and consumer of cement globally), and the need to comply with international environmental and technical specifications.

Nevertheless, the entry of advanced Chinese technologies in low-carbon cement production gives Saudi companies an additional competitive advantage, especially in markets that impose emission restrictions. Additionally, signing currency swap agreements accelerates trade exchanges and reduces currency fluctuation risks.

The Saudi cement sector is subject to direct and indirect influences from global economic changes, especially those related to China. China is the largest importer of Saudi oil, and any increase in Chinese demand leads to higher revenues for the Kingdom, subsequently boosting local construction and infrastructure projects.

On the other hand, economic slowdowns or crises (such as the COVID-19 pandemic) lead to a decline in global demand for energy and raw materials, which may lower oil prices and reduce spending on major projects in Saudi Arabia. Changes in shipping and raw material prices from China also indirectly affect the cost of producing Saudi cement.

However, the local Saudi market remains supported by continuous urban and population growth, ensuring stability in the fundamental demand for cement, with the possibility of expanding into foreign markets when favorable trading conditions arise.

Hail Cement Company occupies a medium position among Saudi cement companies in terms of production capacity and market value. It is smaller than companies like Yamama Cement and Southern Cement, but it stands out for its high operational efficiency and attractive dividends for shareholders.

The company faces strong competition from government and private companies with larger production capacities, yet Hail Cement benefits from its geographical location in the Hail region, giving it an advantage in meeting local demand and supplying construction projects in northern Saudi Arabia.

In terms of financial performance, the company excels in its dividend yield compared to some competitors, benefiting from moderate operating costs and a conservative financial policy. In terms of innovation, the company invests in updating its equipment and production lines with Chinese technologies, enhancing the quality of its products and increasing its competitiveness in the local and regional market.

Saudi-Chinese relations have witnessed significant developments during 2024 and 2025, including the signing of new investment agreements at the China-GCC Forum and strengthening cooperation in renewable energy projects. Saudi Arabia also participated in the Belt and Road Summit, providing additional opportunities to connect Saudi ports with Asian maritime and land corridors.

In the cement sector, Saudi companies benefit from the introduction of low-carbon cement production technologies through cooperation with advanced Chinese companies. The Saudi government has also launched initiatives to finance infrastructure and encourage the use of local products, stimulating demand for cement.

As for Hail Cement Company, production and sales rates stabilized at the beginning of 2025, with the company exploring new export opportunities to neighboring Asian markets, including the potential for exporting its products to China if new trade agreements are facilitated.

The Saudi financial market has seen significant development in policies regulating foreign investment in recent years, allowing Chinese and Gulf investors to enter shares of companies like Hail Cement (3001).

The Capital Market Authority has raised the permissible ownership ratios for foreigners and launched programs to facilitate the opening of investment accounts for international investors, especially after the Saudi market joined international indices like MSCI. These steps support market liquidity and diversify the investor base.

On the other hand, Saudi Arabia seeks to localize industry and increase market attractiveness by improving transparency, governance, and facilitating disclosure processes. Currency clearing agreements with China have also been signed to facilitate capital flows, enhancing the attractiveness of Saudi company shares for foreign investors seeking stable returns and attractive cash distributions.

Saudi-Chinese relations are moving towards greater economic and strategic integration, focusing on new sectors such as renewable energy, manufacturing industries, and advanced technologies. Cooperation in areas such as artificial intelligence, smart transportation, and low-emission industries is expected to increase.

For the industrial sector, China provides Saudi Arabia with advanced technical solutions, with the potential for knowledge transfer and localization of new industries. Saudi cement companies, such as Hail Cement, can benefit from the transfer of green cement production technology and expand into Asian markets through partnership and export agreements.

With increasing trade exchanges and direct investments, the financial relations between the two countries will remain a pivotal factor in supporting the stability and growth of Saudi industrial sectors. It is expected that the coming years will witness the launch of joint industrial projects and the exchange of investments in promising sectors to achieve the goals of Saudi Vision 2030 and the Chinese Belt and Road Initiative.