Saudi cement sector's local sales volume witnessed growth of 6% Y-o-Y in January 2016 to c5.7 million tonnes (flat Q-o-Q), likely helped by projects under construction that the government is committed to finalise, in our view. Local sales volume for covered stocks was flattish Y-o-Y (+2%) in January 2016. Four of our covered stocks showed solid Y-o-Y volume growth in January; the highest growth came from Al Jouf (+16% Y-o-Y, affected positively by SAR500 million three-year contract with Al-Mohileb and Sons Holding Company to supply cement to its projects over 3Q2014-1Q2017), followed by Qassim (+16%), Yamama (+10%), and Eastern (+6%). Companies seeing lower volumes were Saudi (-5%) and Arabian (-4%), the rest were flattish. We expect volumes to inch down 2% Y-o-Y in full-year 2016 (post 7% growth in 2015) on demand slowdown, affected by a cut in government spending given weak oil prices. We assume gradual recovery starting in 2017 (+2%). We expect volume growth to continue in early 2016, followed by a slowdown until early 2017 before a gradual recovery is witnessed. Ex-factory prices will likely remain under pressure in 2016 (below SAR240/ tonne cap for several players), as companies offer discounts to defend market share or absorb transport cost (those located far from high demand areas). Removal of the export ban is a catalyst for the sector, which we believe is more likely to happen post the ease in energy subsidies and the tight 2016 budget. However, strong competition from regional players with excess capacity is a key challenge. We believe beneficiaries are producers in the North (Tabuk, Jouf, Northern), South (Southern, Najran), followed by those in the East (Eastern, Saudi), given their idle capacity and/or location far from higher demand areas (western, central). It will also improve sector utilisation and ease pressure on prices. (Tarek El-Shawarby)