Who would have ever thought that Sidex, the former black hole of Romanian economy, could come to the point where the production capacity is unable to meet demand and prices have doubled in one year? Also, the steel mill's managers will soon talk about Sidex' efforts to sell some of its output in Romania, not only abroad.
This may have looked like an improbable scenario even to Lakshmi N. Mittal, the Indian-born businessman who bought Sidex in 2001 through LNM Holdings, only to continue to take over almost the entire Central and Eastern European steel industry ever since.
The "madness" started by China on the world's steel markets has also invaded Romania, yielding various effects: Sidex is going through what it looks like its most profitable period ever - selling its entire steel output for double prices as compared to last year, piping producers and shipyards are finding it hard to cope, whereas carmakers (Automobile Dacia) are praying that this situation does not last long.
The unprecedented surge in steel demand in China has triggered many records for the international steel markets: this year, the world's steel output is slated to exceed one billion tones, for the first time ever, while prices for almost all steel products have soared to all-time highs.
Prices went up more than 60% in 2003 and producers estimate the trend to continue this year. However, what has happened in the past three months is beyond the steel producers' wildest dreams: China is buying everything, raising prices by 40-80 percent (depending on the product) as compared to December 2003.
Steel producers are not in a hurry to sell, as they are expecting new price hikes. Still, their reasons for joy are just as many reasons for concern for others: the clients of steel mills (piping producers, shipyards, carmakers, manufacturers of household appliances) are looking for ways to raise prices in their turn, but without hurting sales. In fact, almost every big international company operating in this field has announced significant price increases.
Romania is following the same trend. Sidex, whose output has increased 35% in 2004 as compared to 2002, simply cannot meet international demand, not to mention the deliveries it should make on the domestic market. Furthermore, Sidex managers are even talking about the company's efforts to sell some steel in Romania.
"Despite the adverse conditions affecting the company, Ispat Sidex is confident that it will meet its commitments to the domestic market. We still deem the domestic market as out top priority, in order to serve all of our customers during these difficult times," says Narenda Chaudhary, head of the LNM Holdings operations in Romania.
The "adverse conditions" that Chaudhary mentions are, in fact, Sidex' obligation to turn down international customers that are willing to pay increasingly more money, in order to honour the already existing Romanian contracts.
laurentiu.ispir@zf.ro
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