In Russia, the usual summer boost from the construction sector failed to appear in 2025. Historically, July and August are peak months for steel consumption, yet this year demand fell sharply. Even adjusted for seasonality, July consumption dropped both year-on-year and month-on-month.
The main factor is the high key interest rate. Elevated borrowing costs are limiting investment, slowing construction, and effectively neutralizing seasonal demand. As a result, domestic steel consumption is expected to fall by more than 10% this year, dropping to around 39–40 million tons. Production is also forecast to contract, potentially below 70 million tons.
At the same time, sanctions and logistical barriers have reduced export opportunities. Before 2022, Russia consumed about 60% of its steel output domestically and exported the rest. With exports restricted and domestic demand shrinking, excess capacity has become a serious challenge. The surplus is estimated at 8–10 million tons, much of it due to weak local consumption.
For Russian producers, survival depends on low production costs. Fortunately, many domestic mills remain among the most cost-efficient globally thanks to vertical integration in raw materials and energy. This allows them to maintain output despite the downturn, though recovery is unlikely before 2026 unless interest rates are significantly reduced.
Global Market: Chinese Overproduction and Trade Barriers
Globally, the steel market is suffering from oversupply and growing protectionism. The United States raised import tariffs in mid-2025, while Europe also maintains high barriers. This keeps local prices in those regions well above world averages, with U.S. hot-rolled coil trading near $1,000 per short ton and European levels at $700–740 per ton. In contrast, Russian exports are priced around $460 per ton FOB Black Sea, and Chinese material is even lower.
China remains the central factor. Producing more than half of the world’s steel, it continues to export over 100 million tons annually. With domestic construction slowing, Chinese producers are shipping even more to external markets. Exports in 2025 are expected to be at 115–120 million tons, triple Germany’s entire production. This flood of material is depressing global prices and intensifying competition, particularly in developing countries with fewer trade barriers.
According to international estimates, global excess steelmaking capacity already exceeds 560 million tons and could reach 721 million tons by 2027—about 30% of world demand. Besides China, countries such as India, Iran, and Türkiye are also significant contributors to the glut through aggressive exports.
Despite the challenges, some areas continue to support demand. Renewable energy projects, especially wind, solar, and electric vehicles, require specialized steel. Large-diameter pipes for water and logistics infrastructure also offer opportunities. Meanwhile, construction and infrastructure development in India, Vietnam, and Brazil are sustaining regional demand.
Still, the broader global balance is fragile. A recovery may begin toward the end of 2025 or early 2026, driven by infrastructure programs in Asia and the Middle East, the gradual end of cheap Chinese dumping, and the emergence of hydrogen metallurgy and green steel projects. A sustainable price range for recovery is projected at $600–650 per ton, enough to bring back moderate profitability and investment.
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