Russia’s metalworking and steel industry is experiencing its most severe crisis since the early 2000s, with production volumes hitting 15-year lows, major companies posting record losses, and the sector operating in “survival mode.” The crisis comes from the convergence of three powerful shocks—a collapse in domestic demand, the loss of traditional export markets, and soaring financing costs—and is likely to continue for the foreseeable future.
Steel Production at 15-Year Low
Russian steel production fell to 67 million metric tons in 2025, marking its lowest level in 15 years and a 12% drop from pre-war 2021 levels. The downturn accelerated in the first quarter of 2026, with production falling an additional 10.4% year-on-year to 15.6 million tons, despite continued demand from defense manufacturers.
Industry officials have confirmed the scale of the crisis, stating that production of finished rolled products, pipes, and overall steel output all declined significantly in 2025. A contraction in demand on the domestic market has driven steel prices down to a 10-year low.
The outlook for the year ahead is grim. Visible steel consumption in Russia is forecast to decline significantly in 2025—the lowest figure since 2011. Returning to 2021 output levels will require five to seven years, assuming sanctions risks and external market instability are reduced.
Two Key Factors Driving the Collapse
The crisis is being driven by two primary factors:
1. Domestic Demand Collapse
Steel consumption in key metal-intensive industries has plummeted. Domestic steel consumption fell significantly in 2025 and declined further in the first quarter of 2026. Sectors including construction, machinery manufacturing, oil and gas, shipbuilding, agricultural equipment production, and railcar manufacturing have all reduced their demand for steel.
2. Export Markets Lost
Western sanctions have effectively closed most traditional export markets. The EU, UK, US, Canada, and Japan have completely halted purchases of Russian metal. While producers have redirected some exports to Turkey, China, and CIS countries, total steel exports fell by one-third between 2021 and 2024.
Major Companies in Crisis
The financial toll on Russia’s largest steelmakers has been severe. Almost all large ferrous metallurgy companies reported declines in revenue and profit over the last financial year.
- Magnitogorsk Iron and Steel Works (MMK)Â posted a net loss of 14.9 billion rubles ($165 million) in 2025. The company reduced capacity utilization to 60%, froze new investments, and announced layoffs affecting 10% of its management staff.
- Severstal saw its profits shrink fivefold, with negative cash flow of 30.5 billion rubles ($338 million). The company cut its repair budget by 15% and capital expenditures by 24%, suspended wage indexation, and halted a strategic iron ore pellet project.
- Novolipetsk Steel (NLMK) reported a first-quarter deficit for 2026—nearly five times its losses from the same period last year.
Surging Debt and Borrowing
To cover operational shortfalls and maintain working capital, steel companies borrowed significant amounts in predominantly short-term bank loans in 2025. Consequently, the sector’s problem debt surged according to data from the Russian Central Bank.
Machine Tool Industry: Import Dependence and Collapsing Exports
Beyond steel production, the broader metalworking machinery sector is also in crisis. According to machine tool industry experts:
- Russia ranks low globally in machine tool production, with output far behind China and Italy. Russia accounts for only a tiny fraction of global machine tool production.
- Russia is a major importer of machine tools, importing over $1 billion worth, comparable to Italy and France.
- In the export rankings, Russia does not appear in the top 20. This represents a collapse in exports over six years.
The production of domestic machine tools has stagnated because of high interest rates that block investment, critical component dependency on imports, and a personnel shortage reaching millions in the manufacturing sector.
The Shift to Chinese Suppliers
Chinese manufacturers now control a dominant share of Russia’s metalworking machine tool market. The demand for equipment from China has increased significantly since 2022, making Russia the largest sales market for Asian machine tools.
However, the import dependency remains extreme. Despite localization reaching significant levels in some product groups, imports still account for more than 80% of consumption. Key components such as spindles, guides, and turret heads are still mostly supplied from China. The share of domestic tools remains well below the level needed for genuine technological sovereignty.
Laser Cutting and Advanced Technologies Show Promise
Despite the broader crisis, some segments of metalworking are growing. The Russian laser equipment market has shown impressive growth rates that are not slowing down in 2026:
- Laser cutting shows strong average annual growth, driven by automation and integration with production control systems.
- Waterjet cutting is growing annually, driven by demand from the aircraft industry and work with refractory alloys.
- Additive technologies (metal 3D printing)Â are gaining traction, reducing material waste significantly for geometrically complex parts.
Demand for CNC systems with AI integration is rising, allowing for a reduction in defects and optimization of material cutting.
Government Response and Industry Outlook
The industry is “in survival mode,” according to analysts. Russian metallurgy employs roughly 700,000 people and supports around 100 single-industry towns.
Metalworkers requested tax relief from the Finance Ministry but were rejected due to a lack of budget funds. On the positive side, the government has introduced subsidies, grants, preferential loans, and targeted financing programs through the Industrial Development Fund.
Some analysts argue that a settlement to the war in Ukraine could eventually provide a lifeline through reconstruction demand. However, they concede that this potential catalyst keeps moving further into the future.
Under favorable conditions, a slight production recovery in 2026 is possible, driven by monetary policy easing, implementation of national infrastructure projects, and increased exports to developing countries. However, with sanctions unlikely to ease and domestic demand weak, the industry’s short-term outlook remains bleak.
