Severstal significantly reduces capital investments and other expenses amid falling demand

Demand for steel in Russia has fallen by 31% since the beginning of 2024, which has led to a sharp decrease in the workload of the company's key customers and falling prices.

Illustrative photo: Severstal.

The situation in the industry is becoming increasingly difficult, Alexander Shevelev, CEO of Severstal, said on his VK page following the results of the corporate general meeting.

"The team's painstaking work on cost optimization, which we have been conducting in recent years, has given us an important margin of safety. It allows you not to stop the units, strive to maintain production capacity, as well as responsibly fulfill social and environmental obligations. However, the reality is that it is impossible to completely avoid optimization measures."

The company is reducing expenditure items for 2026 relative to plans to the extent that this will not affect the safety and stability of production.:

• Reduction of the repair fund by 14%.
• Reduction of capital investments by 24%. At the same time, we will continue to implement major strategic projects that underpin our future competitiveness and an environmentally friendly future in the regions where we operate, such as the construction of a workshop for the production of iron ore pellets.
• A significant reduction in administrative costs and a 5% reduction in labor costs, primarily due to the freezing of hiring, abandoning contractors in favor of their own staff, organizational measures, and only last but not least through staff optimization.

In addition, we are forced to postpone the wage indexation announced in February, Shevelev added.

"In the current circumstances, holding it would jeopardize the sustainability of the company in the coming months. We still expect that the situation will allow us to index the results of the first half of the year."

At the same time, the well-being program for employees "For their own" will continue to operate almost in full, as well as VMI, "Flexible benefits", compensation for meals, recreation opportunities, "Dobroservice" and other areas.