Magnified Market Malaise

In the second quarter of 2025 MMK reported steel production plunged 18% year-over-year to 5.2 million metric tons, while pig iron output declined 9%, underscoring an intensifying market malaise. The company attributed these contractions to high interest rates enforced by the Central Bank, which throttled domestic manufacturing & construction demand. Sales of rolled steel slumped 13%, long products 11%, premium steel nearly 20% in Q2. Analyst Ivan Sokolov at Promsvyazbank lamented, “Weak domestic demand is the sine qua non of these results,” reflecting systemic weakness. The output downdraft lacked offsetting export gains due to sanctions & currency barriers, confirming MMK’s predicament is rooted in both supply-side constraints & demand-side retrenchment.

Profit Plunge Pandemic

MMK’s first-half 2025 profit crashed by 88.8% to 5.6 billion rubles, a stark descent from 50.3 billion rubles in H1 2024, marking a spectacular erosion of earnings. Of that, Q2 profit hit a meagre 2.5 billion rubles, marking a 21.1% quarter-on-quarter drop. CFO Elena Petrova acknowledged, “We are navigating unprecedented fiscal headwinds,” emphasising macroeconomic drag. Revenue also receded 25% year-over-year in H1 2025, mirroring slower sales & diminished steel pricing power. Operating margins evaporated as cost pressures from maintenance & raw material logistics intensified, making the profit plunge a direct consequence of squeezed throughput & yawning market contraction.

Scheduling Steel Slump

Operational output fell precipitously, with crude steel down 13.4% y/y to 2.57 million metric tons in Q1 2025 despite a modest sequential quarterly rise of 8.6%. This rebound followed maintenance on oxygen converter No.2, yet output remains well below year-ago levels, highlighting ongoing structural challenges. Premium product sales, which include cold-rolled & pipe offerings, contracted 6%, now constituting 41.7% of portfolio. These figures emphasise that production schedules are being undermined not only by technical malfunctions but also by anemic demand and strategic reprioritisation of product mix, as MMK attempts to stabilise core operations.

Regulatory Rigour & Reliance

Government-level scrutiny is intensifying as Russia grapples with declining steel output, down 8.6% in 2024 and further 7.2% in early 2025, per World Steel Association data. Industry minister Anton Alikhanov has proposed tax relief and fiscal incentives to cushion steelmakers, while President Putin’s administration faces pressure to preserve strategic heavy industry. Alikhanov warned that “the current exchange rate effectively blocks exports,” urging regulation realignment. Such policy options reflect the government’s determination to alleviate MMK’s burden, but also signal that the firm’s vulnerabilities are intertwined with the broader hegemony of national economic architecture.

Infrastructure Impediments & Investments

Maintenance regimes imposed significant output reductions: key blast furnaces & rolling mills underwent extensive servicing, negatively impacting steel output by nearly 14% & pig iron by 4.5% in 2024. These infrastructure impingements were branded “essential for future resilience” by senior engineer Viktor Orlov, who noted ongoing capital allocation declines hamper premium product capacity. MMK’s recent investment plan includes over 20 billion rubles allocated for environmental safeguards & equipment modernisation. Given budgetary constraints from collapsing profitability, these investments are precarious sine qua nons for long-term viability, but strained by financial contraction.

Sanctions, Supply Stresses & Sine Qua Non

Western sanctions have hindered MMK’s access to supplies, particularly coking coal & imported equipment, forcing reliance on domestic Russian suppliers hundreds of kilometers away. This supply chain shift added transport costs & delays, exacerbating operational inefficiencies. The firm still sources up to 70% of its ore from Kazakhstan via SSGPO, though disruptions have required pivoting to alternative Russian sources. These dependencies underscore that external supply conditions remain critical to MMK’s survival, demanding agile resource management amid geopolitical turbulence.

Environmental Emission Encumbrances

Despite economic duress, MMK reported a 7% reduction in CO₂ emissions per ton in Q1 2025, reaching 12.85 kg/ton. Safety performance improved too, with LTIFR down 36.4% to 0.49. These gains reflect sustained commitment to environmental stewardship and occupational safety, even as profits evaporate. CEO Pavel Shilyaev remarked, “Operational excellence cannot be sacrificed,” highlighting that ESG efforts are now intrinsic drivers of long‑term credibility despite fiscal constraints.

Strategic Sales Strategy & Sectoral Sentiment

Amid declining exports, from 32 million tons in 2021 to 20 million in 2024, MMK’s sales strategy is pivoting toward domestic stability. However, domestic demand is forecast to shrink from 44 million tons to 39 million in 2025, as warned by Severstal’s CEO. Analysts observe that this contraction may precipitate plant shutdowns if unsold steel accumulates. MMK’s attempt to stabilise via pricing power & volume hedging is thwarted by persistent macroeconomic stagnation. CEO Dmitry Fedotov asserted, “We must recalibrate sales pragmatically,” acknowledging that sectoral sentiment now hinges on adaptive pricing & lean production.

Key Takeaways

• MMK’s H1 2025 profit plunged 88.8% to 5.6 billion rubles amid steep demand contraction & high interest rates.

• Despite output reductions, CO₂ emissions per ton fell 7% & safety improved, showing ESG remains central.

• Stock trades at ₹43.67 RUB, with high dividend yield but significant technical volatility signals.