4 February 2026
Risks to the financial stability of metallurgical companies are growing, the Center for Strategic Research noted in its report “How Steel Cooled.”
Domestic demand and prices for most ferrous metallurgy products are falling, causing companies’ financial performance to rapidly deteriorate, the Center notes, warning: “If tight monetary conditions, declining demand, and low prices persist, the problems of high debt burdens at metallurgical companies outside the top three (Severstal, NLMK, and MMK) will intensify, potentially leading to a new wave of major restructurings to prevent company bankruptcies.”
For some companies in the industry, the situation is already close to critical, writes the Center for Strategic Research. It cites the example of Mechel, which announced the temporary shutdown of one of its plants effective February 1 due to falling demand.
This week, Severstal summarized its year-end results: revenue fell by 14%, EBITDA by 42%, net profit plummeted almost fivefold, with the company posting a net loss of RUB 17.7 billion in Q4 (though this was due to asset impairment), and free cash flow turned negative: RUB 30.5 billion, including RUB 8.6 billion in Q4 . Other companies have not yet reported their full-year results, but the results for the first three quarters were very weak. MMK reduced its revenue by 23%, EBITDA by more than half, and net profit by almost sixfold. The company’s free cash flow for the first nine months was negative (-RUB 2.6 billion). TMK reported only half of the year under IFRS, while under RAS, its revenue for the first three quarters decreased by 17% and net profit by half.
The metallurgical industry’s profitability fell to 9.6%, down from 15.9% in the first nine months of 2024, according to CSR estimates. This is lower than the interest rate on loans, limiting investment lending opportunities and increasing the financial risks of some companies that need to raise working capital to support their operations.
According to the Center for Strategic Research (CSR), over the first 11 months of 2025, metallurgical companies increased their borrowing by 26.5% (to 2.7 trillion rubles), while their loan portfolio grew by only 1.6% year-on-year (to 3.5 trillion rubles as of December 1). Meanwhile, total corporate loan issuance fell by 4.4%, while the portfolio grew by 7.4%. Such growth in issuance, despite a stagnant portfolio, may signal a predominance of short-term loans and a large volume of restructurings, the CSR concludes: “This is essentially a transition to a ‘plugging holes’ model—using short-term refinancing to maintain working capital rather than invest in development.”
The Central Bank attributed the deterioration in the quality of banks’ corporate portfolios and the increased cost of risk to loans to companies in the coal and metallurgy industries. It noted the increasing number of risky restructurings among companies in these industries with high debt burdens, whose financial condition had deteriorated due to high interest rates, declining demand, and falling prices.
VTB First Deputy Chairman of the Management Board Dmitry Pianov called restructurings “a method of treating default.” He singled out the metals sector, along with the coal industry and commercial real estate, as one of those where the state bank sees elevated credit risks. Thanks to restructurings, which account for 7% of VTB’s loan portfolio, “we have very few bankruptcies in these sectors.”
Companies currently have sufficient funds to service their debts: their liquid assets exceed their liabilities, although the gap has narrowed significantly over the past year, the CSR notes. However, if this continues, demand, prices, and revenues will continue to decline, risks to the financial stability of even the largest companies will increase, the CSR fears. Many companies outside the top three may exhaust their reserves in the near future, after which debt refinancing issues will become paramount. “The industry is entering financial survival mode,” the CSR concludes.
The Russian Steel Association estimates a 5% decline in ferrous metallurgy production by the end of 2025 (66.5 million tons). Moreover, over the first 11 months, primary products (iron, steel, ferroalloys) output decreased by 4.8%, while higher-value products (pipes, profiles, fittings) decreased by almost 14%.
This is a direct consequence of the economic slowdown, according to the Center for Strategic Research. Exports even increased, but were unable to offset the decline in domestic demand, which reflects the cooling of business activity in all key metal-consuming industries. Chief among these is construction, which is experiencing serious problems; housing construction has slowed due to reduced demand. New project launches fell by 12% last year, and residential building completions for the first 11 months decreased by 2.4%. Infrastructure construction also saw a decline, according to the Center for Strategic Research: the postponement of some infrastructure projects (including the third phase of the Eastern Polygon) significantly reduced ferrous metal consumption.
Other consumers are also faring poorly. “The auto industry led the decline in Russian industry over the first 11 months (-23.6% year-on-year), while production of other machinery, machine tools, and equipment fell by 6.2%,” the Center for Strategic Research reports. As a result, production declines have been recorded across all ferrous metallurgy product groups for the second year in a row.
Moreover, “the varying scale of decline across various product groups indirectly highlights the ‘pain points’ of Russian industry: the greatest losses are being suffered by segments tied to the investment cycle, high-tech and capital-intensive industries, and large infrastructure, while basic low-value-added production is demonstrating somewhat greater resilience,” notes the Center for Strategic Research. It sees this as a decline in the development of the most knowledge-intensive and high-margin value-added processes and the risk of perpetuating technological backwardness.
The Center for Strategic Research compares metallurgy to the circulatory system of industry, ensuring the viability, development, and renewal of most other sectors. Therefore, the situation in the industry is not a narrow industry-specific problem, but a symptom of systemic risks in the economy, the Center for Strategic Research emphasizes: “Metallurgy is a mirror of the real sector of the economy, and it reflects the recession.”