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Russian Steel Industry Faces Deepest Crisis Since Early 2000s as Exports Collapse
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Western sanctions, a slowing domestic economy, and high interest rates have plunged the Russian metallurgy sector into its deepest crisis since the 2000s, The Moscow Times reported on June 12, citing Russian state media.
Steel production in the country fell to 67 million tons in 2025, marking it’s lowest output level in 15 years.
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Compared to the pre-full-scale invasion of Ukraine year of 2021, Russian steelmakers have lost 12% of their total output, equating to a drop of 9 million tons annually. This decline has only accelerated into early 2026. Despite ongoing orders from the defense sector, national steel production plummeted by an additional 10.4% in the first quarter of 2026, dropping to 15.6 million tons, according to data from the Chermet Corporation cited by The Moscow Times.
The market is being squeezed by two main factors: a sharp contraction in domestic demand across metal-intensive industries and the closure of traditional export markets. Alexey Parshukov, Senior Vice President of the Industrial Metallurgical Holding (PMH), noted that domestic steel consumption in sectors like construction, machine building, and oil and gas dropped by 14% last year and another 15% in the first quarter of 2026, according to Russian media.
Due to Western sanctions, countries including the EU, UK, US, Canada, and Japan have completely halted purchases of Russian metal. While companies have attempted to redirect exports to Turkey, China, and CIS countries, total foreign sales still plummeted by a third—or 10 million tons—between 2021 and 2024, The Moscow Times reported.
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The financial toll on major steelmakers has been severe. The Magnitogorsk Iron and Steel Works (MMK) posted a net loss of 14.9 billion rubles ($165 million) in 2025. In response to the mounting losses, MMK reduced its capacity utilization to 60%, practically froze all new investments, and announced layoffs affecting 10% of its management staff, according to Russian media reports.
Severstal, another industry giant, saw its profits shrink fivefold, resulting in a negative cash flow of 30.5 billion rubles ($338 million). To stay afloat, the company slashed its repair budget by 15% and capital expenditures by 24%. It also froze wage indexation and suspended a strategic iron ore pellet production project in Cherepovets, The Moscow Times noted.
The larger Russian metallurgical industry, which employs roughly 700,000 people and supports around 100 single-industry “monotowns,” is currently operating in “survival mode,” according to analysts from the Russian Center for Strategic Research, The Moscow Times reported.
To cover operational shortfalls and maintain working capital last year, steel companies took out 2.7 trillion rubles ($30 billion) in predominantly short-term bank loans. Consequently, the sector’s problematic debt has surged by 600 billion rubles ($6.6 billion), according to data from the Russian Central Bank cited by The Moscow Times.
Analysts warn the crisis could drag on for years, threatening to push the industry back to the precarious state it was in during the early 2000s without state intervention. However, pleas for tax relief from the Ministry of Finance were rejected last year due to a lack of available budget funds.
The Moscow Times noted that, while some Russian analysts suggest that an end to the war against Ukraine could eventually spark a reconstruction-driven boom in metal demand, they concede that this potential lifeline continues to be pushed further into an uncertain future.
The macro-level collapse is already devastating individual industry giants, such as Novolipetsk Steel (NLMK). Russia’s largest steelmaker had recently reported a first-quarter deficit of 5.9 billion rubles ($64.1 million) for 2026—nearly five times its losses from the same period last year.
With revenue dropping 10% and operating losses tripling, NLMK’s financial freefall serves as a bleak case study of the systemic crisis forcing competitors like Severstal and MMK to slash jobs, freeze investments, and brace for a multi-year downturn.
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