Main points
- Steel consumption in Russia has fallen sharply, with domestic demand falling by 15% in the first quarter of 2026.
- Severstal's financial performance has deteriorated, in particular, profit has fallen by 54%, and the company is forced to cut costs.
An important industry in Russia is flying into the abyss / Collage by Channel 24, photo Shutterstock, Severstal
Steel consumption in Russia has fallen sharply, and the rate of decline is only gaining momentum. According to the results of the first quarter of 2026, domestic demand decreased by 15% year-on-year. For comparison: for the whole of 2025, the decline was 14%.
Metallurgy crisis in Russia: what is known?
According to PJSC Severstal, one of the country's leading steel producers, the decline in steel consumption in Russia accelerated in the first quarter amid a slowdown in the economy, Bloomberg writes.
However, the problems of metallurgists are only a reflection of the broader picture.
- The Russian economy has begun to slow down after a period of relative stability that began in 2022;
- One of the key factors is the tough policy of the Central Bank of Russia.
- High interest rates, introduced to curb inflation, actually “strangle” business and reduce demand for industrial products.
Domestic prices have also fallen amid weak demand. In particular, the cost of hot-rolled steel, one of the key products, fell by 7% year-on-year in the first quarter.
How is Russia's Severstal declining?
Severstal's financial performance has deteriorated sharply:
- revenue fell by 19% to 145.3 billion rubles;
- earnings before interest, taxes, depreciation and amortization fell by 54% to 17.9 billion rubles;
- Profitability dropped to 12% – one of the lowest levels in the company's history.
In fact, we are not just talking about a recession, but about a serious blow to business efficiency.
To stay afloat, the company is already forced to cut costs: investments, personnel costs, and maintenance are being reduced.
Despite this, Severstal still looks more stable than many of its competitors – production is running at full capacity. However, the situation at Magnitogorsk Metallurgical Plant is much more complicated. There:
- stop some of the capacities
- reduce investments
- optimize management personnel
How important is metallurgy for Russia?
The Russian metallurgy industry is under pressure from the Central Bank's high key rate and the strong ruble. Loans are too expensive for businesses, and the strong ruble is limiting export revenues. About this in the commentary Channel 24 economist Ivan Us.
Ivan Us
Candidate of Economic Sciences, Chief Consultant of the National Institute for Strategic Studies
When we look at the Russian economy, the first is the oil and gas industry, but the second is metallurgy. This is very easy to understand if you look at the Russian Forbes list. Where are the main billionaires? It's either oil or metals. Mordashov – Severstal, Lisin – Novolipetsk Metallurgical Combine, Rashnikov – Magnitogorsk Combine.
Now, major steel producers in Russia are starting to cut capacity due to declining domestic demand and limited export opportunities.
For example, one of the industry giants, Magnitogorsk Metallurgical Combine (MMK), was 70-80% loaded in 2025 and ultimately suffered a net loss of almost 15 billion rubles.
Interesting! In 2026, the utilization of MMK's production capacities decreased to 60%, so its management managed to optimize costs, in particular for equipment repairs, the implementation of the investment program, as well as reduce management personnel at all levels by 10%.
Economist Ivan Us says that given the situation in the industry, the risks of further layoffs at large metallurgical enterprises are very high. The expert recalled that back in June 2025, at the St. Petersburg Economic Forum, Severstal CEO Alexander Shevelev suggested the possibility of a shutdown of metallurgical enterprises in Russia due to the current monetary policy.
What is depleting Russia's economy?
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Russia is likely understating its budget deficit by $30 billion, and real inflation is approaching 15% instead of the official 5.86%. ISW believes that the Kremlin is trying to strengthen its position at the negotiating table with such manipulations.
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Recall that the Russian president recently held a closed meeting with oligarchs, but some interesting details still made it to the media. In particular, Vladimir Putin asked to make contributions to the state budget in order to stabilize the economic situation.
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In an exclusive commentary for Channel 24, political strategist Taras Zagorodny confirmed that this is not the first time that the aggressor country has been called upon to “throw itself into war.”