Falling profits and production in Russia's metallurgy lead to hidden deindustrialization - intelligence
Kyiv • UNN
A sharp deterioration in financial and production indicators is being recorded in the Russian metallurgical industry: demand is falling, investments are shrinking, and debts are rising. This leads to a halt in the modernization of enterprises and a gradual reduction of production capacities, which experts regard as signs of the hidden deindustrialization of the Russian economy.
Falling profits, reduced investment, and declining production in the Russian metallurgical industry indicate a deepening systemic crisis that is gradually taking on the signs of a hidden deindustrialization of the Russian economy. This was reported by the Foreign Intelligence Service, according to UNN.
The first quarter of 2026 became catastrophic for one of Russia's largest metallurgical companies, Severstal. Net profit plummeted 370-fold—from $281.6 million to $0.76 million. Free cash flow went into the negative by $539.5 million. Cash reserves by the end of March dropped to $65.5 million, compared to $513.2 million at the beginning of the year and $1.72 billion at the start of 2025. Total debt rose to $892.7 million. The company has not paid dividends for five consecutive quarters,
The reasons remain unchanged. Domestic demand for steel in the first quarter of 2026 fell by 15% year-on-year. Tight monetary policy suppressed investment activity and crashed prices: the average cost of hot-rolled sheet in Russia decreased by 7%. Sanctions cut off what previously compensated for domestic weakness—exports. Until 2022, Europe took up to 17% of Severstal's supplies. Overall, Russia's steel exports shrank from 31 million tons in 2021 to 20 million tons in 2024–2025.
In response, the company is cutting costs: the maintenance fund by 15%, capital investments by 24%. Hiring is frozen, salary indexation is canceled, and the construction of an iron ore pellet production shop in Cherepovets has been suspended. A similar picture is seen at the Magnitogorsk Iron and Steel Works: capacity utilization has been reduced to 60%, part of the investments and repairs have been halted, and a 10% reduction in management personnel is being prepared.
Against this backdrop, the Russian Forbes rating is particularly cynical. Severstal owner Mordashov topped the list of Russia's richest businessmen with a capital of $37 billion. Over the year, his fortune grew by $8.4 billion. The owner of a company that zeroed out its profits and is eating through its reserves has become the richest person in Russia,
As a result, Russian metallurgy is moving from an optimization phase to a conservation phase. Next is hidden deindustrialization: capacities formally exist, but there is no modernization, no repairs, and no personnel.
Russia and China could become rivals in the 2030s - intelligence30.04.26, 14:37 • 2042 views