Russian metallurgical giant Severstal struggles as industry mirrors 1990s collapse
Russian metallurgy loses profits due to sanctions against Russia (Illustrative photo: Getty Images)
Falling demand and sanctions have hit Russian metallurgy hard. The country’s largest company, Severstal, continues to lose profit, has suspended dividends, and is cutting staff, reports The Moscow Times.
According to the report published on Monday, in the third quarter the company, owned by billionaire Alexey Mordashov, earned only a third of last year’s profit - 12.99 billion rubles. Over the first nine months, net profit fell 57% to 49.74 billion rubles.
Severstal’s revenue declined 18% for the quarter and 14% over nine months, while its EBITDA dropped 45% and 40%, respectively.
Meanwhile, Severstal’s free cash flow - reflecting the difference between inflows and outflows - turned negative, totaling minus 21.24 billion rubles for January–September. This means the company lost an average of 2.3 billion rubles per month.
Severstal’s cash reserves, its so-called financial cushion, have nearly halved since the start of the year, dropping to 72.2 billion rubles from 128.5 billion at the beginning of January.
The company accounts for about 14% of all steel production in Russia.
“The crisis in Russian and global metallurgy is intensifying,” said CEO Alexander Shevelyov.
According to him, domestic demand for metal has already fallen by 15%, and business activity is declining across all key consumer sectors. Due to negative cash flow, Severstal will again forgo dividend payments to shareholders.
Sanctions have caused the loss of a third of exports: in 2024, metallurgists managed to ship only 20 million tons abroad compared to 31 million tons in 2021.
In September, Shevelyov acknowledged that the current crisis is comparable in scale to the metallurgical downturn of the 1990s.
Staff reductions
According to sources cited by Reuters, amid falling demand, rising credit costs, and worsening financial results, most Russian metallurgical enterprises have begun cutting staff, primarily targeting employees in auxiliary departments.
Other sources note that companies are considering switching to a four-day workweek, as the largest automakers have already done, but so far are hesitant to implement it.
There is still a surplus of workers in the metallurgy sector, but enterprises are trying to avoid mass layoffs, a source told the agency.
In March 2024, an unknown drone attacked the Cherepovets Metallurgical Plant, owned by Severstal.
Following the attack, a major repair of the blast furnace was carried out.
Additionally, according to the GMK Center, Western sanctions against Russian metallurgy have not produced the expected effect.
Russia has partially redirected its metal exports from the EU and US markets to Asia, the Middle East, and North Africa.
