Russian Metallurgy Rapidly Losing Profits Due to Sanctions

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Russian Metallurgy Rapidly Losing Profits Due to Sanctions

29.07.2025 News

Russia’s largest steelmakers are reporting a sharp decline in profits, citing rising interest rates, shrinking domestic demand, and international sanctions that limit access to foreign markets. This was reported by The Moscow Times.

Magnitogorsk Iron and Steel Works (MMK) — one of the largest in Europe and the second-biggest in Russia — saw its profit drop ninefold in the first half of the year, falling to 5.6 billion rubles. Revenue at the company, which is owned by billionaire Viktor Rashnikov (net worth $9.6 billion, according to Forbes), fell by a third, while EBITDA dropped by more than 50%.

MMK’s cash flow turned negative: in the second quarter, the company’s expenses exceeded income by 4.9 billion rubles.

Severstal, owned by billionaire Alexey Mordashov (net worth $28.5 billion), also ended the half-year with a negative cash flow of 29.1 billion rubles. The group, which unites eight steel plants, saw its revenue fall 16% year-over-year, while net profit halved to 15.5 billion rubles.

For the third consecutive quarter, the company has suspended dividend payments and reports a sharp 15% drop in steel demand within Russia this year — following a 6% decline last year.

“The metallurgy sector is in very poor condition,” said economist Nikolai Kulbaka.
He noted that sanctions have hit Russia’s raw materials exports hard, and domestic consumption alone is insufficient, as the Russian economy continues to stagnate.

GDP growth has slowed to one-third of previous rates, while construction volumes have dropped by nearly a third — reaching a three-year low.

The outlook for domestic consumption this year is bleak: steel demand in Russia may fall from 43–45 million tons to 39 million tons.

Russia’s government is considering tax relief measures for the steel industry, according to Industry and Trade Minister Anton Alikhanov, who in June mentioned possible adjustments to the excise tax formula for liquid steel.

Analysts at PSB Bank believe a recovery in the market is unlikely before late 2025 or early 2026.

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