New systematic crisis is brewing in the Russian metallurgical industry

Metallurgical enterprises of Russia show deterioration of its indicators with an enviable stability. A complex of problems presses down on the industry, among them is reduced demand for their products. Domestic builders and automakers but less and less of metal, the trade with long-term partners abroad is decreasing. The bet on China hasn’t been justified too. Now there is a surplus of own steel.

Steel subsoil

Since the era of Soviet industrialization, a special attention was paid to metallurgy. New plants were constructed and cities grew around them. As a result, the share of the Soviet Union in the global production of iron and steel reached 25 %. In 1954, a special department – Ministry of Ferrous Metallurgy of the USSR – was established for the development of the industry. Now the Russian steel industry is going through hard times.

The problem of Mechel is wide known. Its net debt is currently about $9 billion. Over several past months, the Government and the business community have been trying to figure out how to save the company from bankruptcy. It’s impossible just to close the plant, as more than 80 thousand people work there. But the problems of Mechel are just the tip of the iceberg. The entire steel sector suffers from a number of serious problems. Owner of Novolipetsk metallurgical plant (NLMK) Vladimir Lisin admitted that some enterprises in the steel industry would go bankrupt, and even the Government wouldn’t be able to help them. It is likely that Mr. Lisin’s forecasts come true.