"Russian Metallurgy Is Very Bad"

Major steel companies reported a crash in profits.

Russian steel companies are experiencing mounting financial problems due to rising lending rates, falling demand and increased sanctions cutting off access to export markets, writes The Moscow Times.

Magnitogorsk Iron and Steel Works, one of Europe's largest and Russia's second-largest steelmakers, reported a nine-fold drop in profits to 5.6 billion rubles in the first half of 2025. MMK, owned by billionaire Viktor Rashnikov (fortune $9.6 billion, according to Forbes), saw its revenues fall by a third and EBITDA more than halve.

MMMK's cash flow became unprofitable: receipts to the company's accounts in the second quarter were 4.9 billion rubles below expenses.

"Severstal" billionaire Alexei Mordashov (fortune 28.5 billion, according to Forbes) also ended the half-year with a negative cash flow of 29.1 billion rubles. Revenue at the company, which comprises 8 plants including the Cherepovets Steel Mill, fell 16% year-on-year, while net profit fell by half to 15.5 billion rubles.

Severstal refused to pay dividends for the third quarter in a row and reported a sharp drop in demand for steel inside Russia - down 15% this year after a 6% slump a year earlier. "The second quarter was extremely difficult for both the steel industry and the entire Russian economy," complained Severstal CEO Alexander Shevelev.

"Metallurgy is very bad," economist Nikolai Kulbaka described the situation: sanctions have hit Russia's raw material exports, and steelmakers have been affected. "Domestic consumption is insufficient because the Russian economy is slowly stagnating," the expert adds: GDP growth has slowed threefold, and construction has fallen by almost a third, to a 3-year low.

Because of falling demand and expensive loans in the country, there is a risk of a complete shutdown of steel plants, Shevelev complained at SPIEF-2025. According to his estimates, this year steelmakers may face the inability to sell up to 6 million tons of steel, or almost 10% of last year's production.

The consumption forecast for this year is quite pessimistic, Shevelev lamented: demand inside Russia may drop from 43-45 million tons to 39 million tons.

The government is considering lowering taxes for steelmakers, the head of the Ministry of Industry and Trade Anton Alikhanov said in June. The excise tax formula for liquid steel may be adjusted, he said. "The current level of the national currency exchange rate, unfortunately, is actually a barrier for exporters. In this situation, we believe it is right to work on optimizing the fiscal burden on the steel industry and reducing regulatory costs," Alikhanov said.

The problems of metallurgists are caused by the slowdown in the economy and the impact of high rates, PSB analysts wrote. According to their estimates, the situation can be expected to improve not earlier than the end of this year or the beginning of next year.

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