Russian steelmaker Severstal weighs another investment cut

Russian steelmaker Severstal may cut its investment program by another 24% to around 85 billion roubles ($1.1 billion) in 2027 due to falling steel demand, according to a company presentation for investors seen by Reuters on Friday.

The measures should help ensure positive free cash flow, the company said.

The forecast for 2027 is preliminary and will remain under review until the end of 2026, according to the presentation.

Steel demand shrinking

Russian steelmakers are under pressure from Western sanctions, high interest rates and weak steel demand, which has fallen by around 30% from 2023 levels.

Demand from Russia’s construction, energy, automotive and machinery sectors — key consumers of steel — is shrinking as companies postpone investment because of high interest rates aimed at curbing inflation.

Steel consumption in Russia fell by about 14% last year, and Severstal, ranked among the country’s top four steelmakers, expects it to decline by a further 7% to 9% this year.

In March the company announced cost-cutting measures in response to weakening demand and a significant deterioration in market conditions, cutting its 2026 investment program by 24% to 112 billion roubles from the 147 billion roubles previously planned.

At the same time it said it intended to continue implementing major strategic projects.

Severstal’s billionaire owner Alexei Mordashov, ranked by Forbes as Russia’s richest businessman, warned in June that the steelmaker would continue cutting investment after slipping into a negative cash position.

($1 = 77.3300 roubles)

(By Anastasia Lyrchikova; Editing by Jan Harvey)