Crisis in russia’s Metallurgy: Declining Production, Losses and Mass Layoffs

A wave of forced layoffs and switching to a reduced work week has reached russia’s metallurgy, one of the key non-resource industries, which employs about 700,000 people and accounts for almost a fifth of the country’s industrial production.

Due to the declining demand, high borrowing costs, and a sharp deterioration in financial performance, most metallurgical companies of the rf have begun to cut staff. The industry, which has lost a third of its exports due to sanctions and the closure of Western markets, is experiencing a crisis comparable to that of the 1990s.

In 2024, production decreased by 1.5 % despite military orders, and in 2025, the rate of decline accelerated sharply: by 10.2 % in July and by 8.4% in August. Magnitogorsk Iron and Steel Works (MMK) reported an 18 % decline in steel production and a 9 % decline in pig iron production in the second quarter. “Mechel” reduced sales by 11 %, while the Pipe Metallurgical Company (TMK) reduced sales of steel pipes by 18 %, and of seamless pipes – by 22 %. In the first half of the year, TMK incurred a net loss of 3.2 billion rubles, “Mechel” – of over 40 billion rubles, and MMK recorded a negative cash flow of 4.8 billion rubles.

According to the financial report of “Severstal” PJSC (owned by Aleksey Mordashov, about 14 % of steel production in the rf), in the third quarter of 2025, the company’s net profit decreased threefold to $160.4 million. Over the first nine months of the year, the figure dropped by 57 % to $614.4 million. Revenue decreased by 18 % for the quarter, and by 14 % for the first nine months, while earnings before interest, taxes, amortization and depreciation decreased by 45  % and 40 %, respectively.

“Severstal”’s free cash flow turned negative, amounting to –$262.4 million for January–September (an average of –$28.4 million per month). The amount of funds in the accounts almost halved – from $1.59 billion to $892 million. The company’s board of directors decided not to pay dividends for the second and third quarters of 2025.

Against the background of stagnant domestic demand, which decreased by 15 %, and declining export profitability, russia’s metallurgical companies expect further deterioration in financial results in the fourth quarter.