Russia's steel industry on the brink: Where is the help for 600,000 jobs?

Russia's steel industry on the brink: Where is the help for 600,000 jobs?

Russia's steel industry is in an alarming state. Production cuts and potential factory closures are already on the horizon, and this is having a significant impact on the country's entire economy. Alexander Shevelev, the head of a leading steel producer, warns that Russia could potentially produce up to six million metric tons less steel in 2025, about 10 percent of the 2024 output. This development is exacerbated by falling domestic demand and rising export costs.

According to current forecasts, steel consumption in Russia could fall from 43 to 45 million tons to just 39 million tons. This is due in particular to the high inflation, which is currently at 9.9 percent, and the extreme key interest rates of 20.0 percent. These interest rates place a significant burden on companies as they make investments more difficult and thus dampen economic growth. Vladimir Putin has already called for measures to cut key interest rates, with the last adjustment taking place slightly in June 2023.

Exports in crisis

The effects of these economic conditions are serious: exports of steel, a key industry for Russia, have fallen sharply in recent years. In 2023, steel exports were only 11.6 million tons, a decrease of 27 percent compared to the previous year. In the years between 2015 and 2023, exports fell by a total of 22.3 percent. Russia was once the third largest steel exporter in the world in 2017, shipping 33.3 million tons abroad.

Around 600,000 people are employed in the Russian steel industry, which generates around ten percent of the country's export revenue. The high unemployment in this sector could have devastating social consequences if companies actually go bankrupt. While the government is considering implementing tax breaks and regulatory adjustments to support the steel industry, it remains unclear whether there will be enough financial resources to provide effective assistance.

A critical time window

The situation is therefore not only economically critical, but also socially critical. Two senior officials warned that essential resources in the country could run out. The circumstances are forcing the industry to adapt to far-reaching changes, while export opportunities are hanging in the balance due to the strong ruble and high interest rate policy. Investment programs have already been cut, putting companies under even greater pressure.

Overall, the future of the Russian steel industry is vulnerable. In order to respond to the challenges, the industry not only needs strategic adjustments, but also urgent support from the government.

For more details read the articles on Mercury and fr.de.