Russian Metallurgical Giant Severstal Struggles as Industry Mirrors 1990s Collapse
1. Severstal’s Financial Struggles
Severstal, one of Russia’s largest steel producers, has seen a dramatic decline in profits this year. In the third quarter of 2025, net profit fell by 62% year-on-year to 12.99 billion rubles, and for the first nine months, it dropped 57% to 49.74 billion rubles. This sharp decline reflects weakening domestic and international demand for steel and highlights the mounting financial pressures on even the largest players in Russia’s metallurgical sector.
2. Causes Behind the Crisis
The downturn is driven by a combination of economic and geopolitical factors. Falling demand for steel, export restrictions, and elevated interest rates imposed by the Central Bank of Russia have increased borrowing costs and discouraged investment. Together, these factors have created a challenging environment for steel producers, forcing them to operate under tighter margins and reduced production capacities.
3. Company Response Measures
In response to the financial strain, Severstal has suspended its third-quarter dividend and implemented cost-cutting measures, including staff reductions. CEO Alexander Shevelev has compared the current situation to the industrial collapse of the 1990s, signaling the severity of the crisis. These actions reflect the company’s attempt to stabilize operations while navigating a volatile economic landscape.
4. Industry-Wide Impact
The crisis is not limited to Severstal. Other major Russian steel producers, such as Magnitogorsk Iron and Steel Works and Evraz Group, have also announced layoffs and production cuts. This widespread struggle indicates that the entire Russian metallurgical industry is facing a systemic downturn, rather than isolated company-specific problems.
5. Broader Economic Implications
The decline in the steel sector underscores the vulnerability of Russia’s industrial economy. Prolonged financial pressures, combined with sanctions and geopolitical tensions, threaten investment, employment, and regional economic stability. Analysts warn that if conditions persist, the country could face a prolonged industrial slump reminiscent of the post-Soviet economic collapse of the 1990s, with far-reaching consequences for the broader economy.
3. Company Response Measures
In response to the financial strain, Severstal has suspended its third-quarter dividend and implemented cost-cutting measures, including staff reductions. CEO Alexander Shevelev has compared the current situation to the industrial collapse of the 1990s, signaling the severity of the crisis. These actions reflect the company’s attempt to stabilize operations while navigating a volatile economic landscape.
4. Industry-Wide Impact
The crisis is not limited to Severstal. Other major Russian steel producers, such as Magnitogorsk Iron and Steel Works and Evraz Group, have also announced layoffs and production cuts. This widespread struggle indicates that the entire Russian metallurgical industry is facing a systemic downturn, rather than isolated company-specific problems.
5. Broader Economic Implications
The decline in the steel sector underscores the vulnerability of Russia’s industrial economy. Prolonged financial pressures, combined with sanctions and geopolitical tensions, threaten investment, employment, and regional economic stability. Analysts warn that if conditions persist, the country could face a prolonged industrial slump reminiscent of the post-Soviet economic collapse of the 1990s, with far-reaching consequences for the broader economy.
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