Severstal Sees Steel Demand Drop in 2026 Despite Output Hike

Severstal Reports 79% Profit Drop, Forecasts Lower Demand

Russian steel producer Severstal anticipates a continued decline in steel demand for 2026, even as it announced a 79% plunge in net profit for 2025. The company's earnings fell to 31.99 billion roubles, with revenue down 14% due to weaker steel prices and challenging market conditions.

Overview of the Russian Steel Market

Russia’s domestic steel demand has been under pressure since 2024, primarily affected by high interest rates and reduced activity from key consumers in the construction sector. Severstal reported that domestic steel consumption dropped by approximately 14% in 2025, reflecting a broader economic slowdown.

Company's Response and Market Impact

Despite the pessimistic demand forecast, Severstal paradoxically plans to increase steel production to 11.3 million metric tons in 2026, an increase from 10.8 million tons in 2025. Financially, the company reported negative free cash flow for 2025 and confirmed it will not pay a dividend for the fourth quarter, signaling financial strain.

Summary and Outlook

Severstal faces a challenging period with falling demand and profits. The decision to increase production suggests a strategy to capture market share or anticipate a long-term recovery. Investors will monitor how this production increase aligns with the forecasted market contraction and its impact on the company's financial health.

FAQ

Q: Why did Severstal's profit fall in 2025?
A: Net profit dropped 79% primarily due to lower steel prices, which led to a 14% decrease in revenue.

Q: What is Severstal's production plan for 2026?
A: Despite forecasting lower demand, the company plans to increase its steel output from 10.8 million to 11.3 million metric tons.

Source: Investing.com