"The Russian steel sector is currently struggling significantly"
In the heart of Russia, a severe crisis is unfolding in the steel industry. Major players are grappling with sharp declines in profits, falling production, weakening domestic demand, and expanded international sanctions that restrict exports and complicate operations.
The construction, infrastructure, and heavy industry sectors, major consumers of steel, have contracted significantly. Severstal, for instance, reported a 15% decline in domestic demand this year, following a 6% drop in 2024. Construction activity shrank by nearly 30%, reaching its lowest in three years.
International sanctions have drastically limited the ability of Russian steelmakers to export their products, leading to growing stockpiles of unsold steel. This is a critical challenge, as the World Steel Association noted that Russian steel production fell by 8.6% in 2024 and another 7.2% in early 2025, the steepest among major producers worldwide.
High borrowing costs, due to increased interest rates, have further impacted profitability and operational viability. In response, industry leaders warn of potential plant shutdowns if the weak demand and financial challenges continue, projecting that up to 6 million tons of steel (about 10% of 2024 output) may remain unsold in 2025.
The Russian government and industry experts are attempting various mitigation strategies. The government is considering tax cuts and relief measures to ease financial pressures on steel companies. Officials recognize that the current exchange rate hinders exports, and there are calls to reduce fiscal and regulatory burdens on the sector.
Experts highlight the ongoing economic stagnation as a key underlying issue, noting that GDP growth has slowed to one-third of 2024 levels, further weakening steel demand. The forecast for this year's consumption is quite pessimistic, with domestic demand potentially decreasing from 43-45 million tons to 39 million tons.
The crisis is multifaceted, involving shrinking domestic markets, impaired export channels due to sanctions, and costly financing. However, the broader economic slowdown remains a critical headwind for the industry’s recovery. The future of the Russian steel industry hangs in the balance as it navigates these challenges.
References:
[1] Reuters. (2025, July 1). Russia's steelmakers struggle with falling demand, sanctions, and high borrowing costs. Reuters.com.
[2] TASS. (2025, June 15). Russian steel industry faces crisis amid falling production, sanctions, and high interest rates. TASS.com.
- The troubles in the Russian steel industry aren't confined solely to the sector itself, as the construction and infrastructure sectors, major consumers of steel, are also experiencing significant contraction, exacerbating the challenge.
- In an effort to shore up the struggling steel industry, the Russian government is contemplating tax cuts and relief measures, recognizing the need to alleviate financial pressures amid high borrowing costs and the adverse effects of sanctions on exports.
