Sanctions bite: Russian steel output collapses to lowest point since invasion

Russia’s metallurgy industry suffered its worst performance since Moscow launched its full-scale invasion of Ukraine, with production plummeting 10.2% in July compared to the same month last year, according to Rosstat data cited by Ukraine’s Center for Countering Disinformation.

The metallurgy collapse delivers concrete evidence that Western sanctions are systematically degrading Russia’s capacity to sustain its war against Ukraine and signals that Moscow faces mounting difficulties maintaining current military production levels.

Key metallurgy companies report massive losses

The industry’s flagship enterprises are buckling under the pressure.

Magnitogorsk Metallurgical Plant—a critical supplier for Russia’s defense sector—slashed steel output by 18%. In comparison, Mechel reduced sales by 11% and Tubular Metallurgical Company lost up to 22% of sales. Companies are reporting billion-ruble losses.

Magnitogorsk reported profits plummeting ninefold to 5.6 billion rubles ($62 million) in the first half of 2025, while revenues dropped by a third. The company’s cash flow turned negative, with expenses exceeding income by 4.9 billion rubles (approximately $55 million) in the second quarter alone.

Magnitogorsk supplies steel for armored vehicles and artillery systems, while companies like Tubular Metallurgical produce materials essential for missile manufacturing. Each percentage point of production decline means fewer tanks, shells, and weapons systems reaching Russian forces.

Drones can suppress the enemy without even striking. "Soldiers begin to hide from the sound of UAVs alone and do not leave cover for a long time," Russian blogger Unfair Advantage wrote.

"If the enemy is accustomed to being afraid of drones, then a UAV 'carousel'—that is, the successive replacement of one strike UAV with another, can lead to the effect of suppressing positions, despite significant time intervals between strikes," Unfair Advantage explained.

Infantry should begin their movement to contact with the enemy during an initial wave of drone attacks. "After the strikes are completed, the infantry takes cover and waits for the next wave of UAVs to arrive—or continues to move, but out of the line of sight of the defenders," the blogger wrote. "This is repeated several times until the infantry reaches the immediate vicinity of the attacked position."

There, the attackers wait for more drones before making their final push through the enemy positions. Drones should be overhead the whole time during the breach—"a mixed carousel of observation UAVs and attack UAVs," Unfair Advantage advised.

To prolong the endurance of any turn of the UAV carousel, the operators can land some drones on the ground or on rooftops, idling their engines but keeping their cameras on—thus preserving the robots' batteries. As long as at least one drone is audible by the defending infantry, the infantry should keep their heads down. They should, in other words, remain suppressed.

The respective new drone tactics belie deepening manpower problems on both sides of the wider war. More and more, both the Ukrainian and Russian armed forces are counting on robots to perform tasks most militaries still assign to human beings.

Ukraine's manpower shortage is well-known. It's possible Ukrainian brigades are short 100,000 trained infantry. But Russia has too few troops, too—despite generous bonuses and deceptive recruiting practices that lure or trap tens of thousands of fresh enlistees every month. Overall, Russian regiments probably have plenty of soldiers. But like Ukrainian brigades, they may specifically lack trained and experienced infantry.

Why risk them on a mission that a robot with a skilled operator can handle?

Broader corporate crisis grips Russian economy

The metallurgy sector’s troubles reflect a deeper crisis across Russian industry. According to Rosstat data cited by Izvestia, nearly one-third of Russian companies reported losses in the first half of 2025—the highest level since the pandemic.

Coal mining enterprises suffered the most, along with utilities, transportation, and scientific research businesses—all sectors supporting military-industrial production.

The Purchasing Managers’ Index (PMI)—a key indicator that measures changes in business conditions with readings below 50 signaling declining activity—fell to 47.0 in July for Russian manufacturing, down from 47.5 in June, marking the steepest decline since March 2022.

 

Sanctions systematically choke supply chains

Already a month ago, Reuters reported companies reducing their production levels, client demand declining, and customers having financial difficulties—all of this impacting both output and new orders.

Ukraine’s Center for Countering Disinformation identified what it called “obvious” causes behind the metallurgy collapse: sanctions, loss of foreign markets, sharp drops in domestic metal demand in construction and machinery, plus restrictive Central Bank policies limiting investment.

Experts cite expensive credit, weak demand, tax increases, sanctions, and rising costs as the main drivers of corporate losses.

Weak demand could leave steelmakers unable to sell up to 6 million tons of production—nearly 10% of last year’s output.

Industry outlook

Severstal CEO Alexander Shevelyov called the second quarter “extremely difficult for the industry,” estimating that weak demand could prevent steelmakers from selling up to 6 million tons of production. This represents a massive loss of potential military materials.

For Ukraine’s allies, the data suggests their sanctions strategy is working as intended—systematically degrading Russia’s long-term military capacity rather than delivering immediate knockout blows.

The Center for Countering Disinformation assessment warns of the collapse risks “mass layoffs, factory shutdowns, and further economic decline in regions critically dependent on metallurgy”—problems that will further constrain Russia’s defense production capacity while creating domestic political pressure on the Kremlin.