MOSCOW (Reuters) -Severstal, one of Russia’s top steelmakers, blamed the high key interest rate for a 15% drop in demand for metals in the first half of 2025, which, along with low prices, resulted in a 55% fall in the company’s net profit in the second quarter.
Last year, the central bank hiked its key interest rate to 21%, the highest level since the early 2000s, as it fights inflation. The regulator started cutting rates last month and is expected to cut further at a rate-setting meeting this week.
The central bank’s tight monetary policy led to a sharp economic slowdown in Russia, with the construction industry—one of the main consumers of steel—hit particularly hard.
“The second quarter of 2025 was extremely challenging for both the metals industry and the entire Russian economy,” said Severstal’s CEO Alexander Shevelev. The company said it will not pay dividends in order to maintain financial stability.
“The high key interest rate is restraining demand for metal products, which decreased by 15% year-on-year in the first half of the year due to reduced consumption in the construction, engineering, and energy sectors,” Shevelev added.
Shevelev stressed that the strong rouble, which rallied by 45% against the U.S. dollar this year, was restricting its access to export markets. Shevelev earlier said that some steel factories in Russia could close down to balance the market.
The company welcomed the expected interest rate cut at the meeting on July 25, stressing in its financial results’ presentation that the cut will have a positive impact on the demand for steel.
Net profit in the second quarter fell to 15.7 billion roubles ($200.3 million), down 55% year-over-year.
(Reporting by Nastya Lyrchikova, writing by Gleb Bryanski; editing by Guy Faulconbridge)