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The head of one of Russia’s largest steel producers has warned of imminent production cuts and plant closures in the country’s steel industry as a strengthening ruble and high interest rates choke off demand and profitability.

The steel industry, which employs more than 600,000 workers and accounts for roughly 10% of Russia’s export revenues, has long been a pillar of the nation’s heavy industry.

Speaking at the St. Petersburg International Economic Forum on Thursday, Severstal CEO Alexander Shevelev said the industry could be unable to sell up to 6 million metric tons of steel this year, nearly 10% of last year’s total output.

The current forecast for domestic steel consumption predicts that demand could fall from 43-45 million tons to just 39 million tons this year, he said.

“That’s effectively the disappearance of an entire industry’s worth of demand,” Shevelev said.

At the same time, exporting steel has become unprofitable due to the sharp appreciation of the ruble.

“The industry … today is practically unable to export metal products, because it is economically unviable,” Shevelev said.

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Meanwhile, Economy Minister Maxim Reshetnikov warned Thursday that Russia’s economy is teetering on the “brink of recession”, casting a downbeat tone over the annual St. Petersburg International Economic Forum (SPIEF), a key event aimed at attracting investment to the country.

Speaking on the second day of the forum, Reshetnikov said “current business sentiment and indicators” point to a looming downturn.

“Overall, I think we are on the brink of a recession,” he told journalists. “Everything else depends on our decisions,” he added, urging Russia’s Central Bank to show “a little love for the economy.”

Russia’s economy has been marked by volatility since it launched its full-scale invasion of Ukraine in February 2022, with growth now slowing after a period when record defense spending led to “overheating.”

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