Russian metallurgy faces mass layoffs as sanctions bite
A wave of forced layoffs and shifts to reduced working hours has reached Russia’s metallurgy industry.
The sector, one of the country’s main non-energy industries, accounts for nearly 20% of its industrial output.
Almost all Russian metal plants have begun to cut staff due to falling demand, expensive credit, and deteriorating financial performance, Reuters reported, citing industry sources, according to The Moscow Times.
According to one source, the steelmakers are initially targeting auxiliary staff. Another source suggested the sector would prefer to switch to a four-day working week—as the largest automakers have already done—but is currently hesitant. “There are too many employees in metallurgy, but companies are trying to avoid mass layoffs,” the Reuters source stated.
Sanctions and financial slump
The crisis in metallurgy, which lost its Western markets due to sanctions and a third of its exports compared to pre-war levels, is comparable to that of the 1990s, Severstal CEO Alexander Shevelev said in September.
According to Rosstat, the metallurgical companies reduced production by 1.5% last year, despite demand from arms factories, which are working around the clock to produce tanks and bombs. The slump accelerated dramatically in 2024: in July, production dropped by 10.2% compared to the previous year (a record since the start of the war), and in August, by 8.4%.
Sharp production declines were recorded by the sector’s main companies. Magnitogorsk Iron and Steel Works (MMK)—one of Europe's largest and Russia's second largest—reported an 18% drop in steel production and a 9% drop in pig iron in the second quarter.
Mechel announced an 11% reduction in sales of steel products in the first half of the year. TMK—Russia's largest steel pipe producer—lost 18% of its steel pipe sales and nearly 22% of its seamless pipe sales.
Mounting losses
For the January–June period, TMK recorded a net loss of 3.2 billion rubles, Mechel—over 40 billion, and MMK and Severstal reported negative cash flows of 4.8 billion and 29.1 billion rubles, respectively.
Mr Shevelev explained that the steelmakers were hit by export restrictions imposed by sanctions, with the crisis exacerbated by the Central Bank’s unusually long period of a high key interest rate. “A financing deficit could, in the long term, turn industrial enterprises into a pile of rusted iron,” he warned.
The Russian government is reportedly discussing a moratorium on bankruptcies in the metallurgy sector. The measure could be included in a support package for the sector, which employs nearly 700,000 people. The companies could also benefit from tax breaks, including a three-month deferral of the excise tax on liquid steel and the mineral extraction tax on iron ore.
Translation by Iurie Tataru
