Western sanctions negatively affect the Russian steel industry

Due to economic sanctions from Western countries, Russian metallurgical plants suffered losses both in sales to the domestic market and for export. All major Russian steel producers lost money in June.

To cut losses, steel mills are actively reducing production and are also considering cutting back on investment. According to various Russian steelmakers, steel production fell by 20-50% in June, while production costs rose by 50% year-on-year.

The two largest steel producers in Russia, Severstal and MMK, also announced the status of their companies. Exports of hot-rolled products from Severstal are likely to halve this year from 71% of the total in 2021, when the company sold 1.9 million tonnes to the EU.

MMK has been selling up to 90% of its output domestically but has a negative ROI of 5.9%, and in terms of investment, MMK has said that the investment plan is likely to be implemented at a ROI of at least 15%, but it was 4% in May.

Given the current market situation, the Russian Ministry of Industry and Trade proposed to ease the pressure on the country's steel industry by reducing taxes and eliminating excise taxes on liquid steel.

However, the Ministry of Finance said that it is not yet ready to abolish the excise tax, but may consider the possibility of its adjustment.