Russia’s leading steel companies are confronting a deepening financial crisis as higher interest rates, waning demand and expanding sanctions drastically reduce their access to export markets, threatening the viability of an industry that has long been a cornerstone of the Russian economy.<\/p>\n
Major producers reported dramatically weakened earnings for the first half of 2025.<\/p>\n
Magnitogorsk Iron and Steel Works (MMK), one of Europe\u2019s largest steelmakers and Russia\u2019s second-largest by output, reported a nearly ninefold drop<\/a>\u00a0in profits to 5.6 billion rubles ($70.6 million).<\/p>\n Revenues fell by a third year-on-year, while cash flow turned negative in the second quarter, with outflows exceeding receipts by 4.9 billion rubles ($62 million).<\/p>\n MMK is owned by billionaire Viktor Rashnikov, whose net worth Forbes estimates<\/a> at $9.6 billion.<\/p>\n Severstal, controlled by Alexei Mordashov, Russia\u2019s second-richest man with an estimated fortune<\/a> of $28.5 billion, fared even worse.<\/p>\n The company, which operates eight plants including the flagship Cherepovets Steel Mill, recorded negative cash flow for the full half-year, with outflows surpassing inflows by 29.1 billion rubles ($370 million).<\/p>\n Revenues fell 16% and net profits halved to 15.5 billion rubles ($195 million). Severstal opted not to pay dividends for a third consecutive quarter.<\/p>\n Domestic demand for steel has continued to deteriorate. Severstal reported a 15% decline this year following a 6% drop in 2024, a steep contraction for a country that once counted construction, infrastructure and heavy industry as robust consumers of steel.<\/p>\n The contraction in demand coupled with sanctions that restrict exports has left producers with growing stockpiles and fewer paths to market.<\/p>\n \u201cThe second quarter has been extremely difficult for both the metallurgical industry and the Russian economy as a whole,\u201d Severstal CEO Alexander Shevelev said.<\/p>\n Economist Nikolai Kulbaka attributed<\/a> the industry’s struggles to the cascading effects of international sanctions, which have severely impacted Russia’s raw materials exports and, in turn, affected steelmakers’ ability to operate profitably.<\/p>\n \u201cDomestic consumption is insufficient because the economy is slowly stagnating,\u201d he said.<\/p>\n He noted that GDP growth has slowed to one-third of 2024 levels, while construction activity, a primary driver of steel consumption, has dropped<\/a>\u00a0by nearly 30%, reaching its lowest point in three years.<\/p>\n