The head of one of Russias biggest steel manufacturers has actually warned of impending production cuts and plant closures in the countrys steel market as a strengthening ruble and high interest rates choke off demand and profitability.The steel industry, which utilizes more than 600,000 employees and represent approximately 10% of Russias export incomes, has actually long been a pillar of the countries heavy industry.Speaking at the St.
Petersburg International Economic Forum on Thursday, Severstal CEO Alexander Shevelev said the market could be unable to offer up to 6 million metric lots of steel this year, almost 10% of ins 2015 overall output.The present projection for domestic steel usage anticipates that need could fall from 43-45 million lots to just 39 million heaps this year, he said.Thats efficiently the disappearance of a whole industrys worth of demand, Shevelev said.At the very same time, exporting steel has actually become unprofitable due to the sharp appreciation of the ruble.The market today is practically not able to export metal items, due to the fact that it is economically unviable, Shevelev said.He said thatan currency exchange rate of 90-100 rubles to the dollar, along with a minimized essential rates of interest, would allow steel manufacturers to stay competitive and revive service activity in steel-consuming industries.But in the meantime, whatever is heading toward the fact that we may see production stops at some plants, particularly those having problem with high production costs, he warned.According to the World Steel Association, Russias steel production decreased 8.6% in 2024 the sharpest drop among significant producing nations and fell another 7.2% in the very first four months of 2025.
Russian steel exports have fallen by more than a third given that the full-scale intrusion of Ukraine, from 32 million lots in 2021 to 20 million heaps in 2024.
Analysts state the recession has actually now reached crisis percentages.
A report by investment firm BCS noted that export rates for Russian steel have actually decreased 5% in dollar terms and 26% in rubles considering that January.
At the very same time, a building slowdown has sapped domestic demand.Major manufacturers are currently reporting losses.
Novolipetsk Steel (NLMK) posted a 0.3 billion ruble loss ($3.9 million) for 2024, while Magnitogorsk Iron and Steel Works (MMK), Russias biggest steel provider, lost 1.2 billion rubles ($15.6 million) in the first quarter of this year.Severstal remained profitable, reporting 11.9 billion rubles ($154.7 million) in revenues in between January and March, but suffered a negative money flow of 33 billion rubles ($429 million).
The government is considering tax relief and regulatory changes to support the industry.Industry and Trade MinisterAnton Alikhanov said this week that Moscow is looking at revising the excise tax formula for liquid steel as part of more comprehensive efforts to reduce the burden on producers.The existing exchange rate has unfortunately become excessive for exporters, Alikhanov stated.
We believe its time to enhance the fiscal problem on the metallurgical sector and decrease regulative costs.