Catastrophic losses continue to hit Russia’s Industrial sector, with profit down -107% at Novolipetsk

One of Russia’s largest steel producers, Novolipetsk Steel (NLMK), has reported a net loss of over 1.2 billion rubles in the first quarter of 2025—marking a dramatic downturn of more than -107% compared to the 17.2 billion ruble profit recorded during the same period last year. The reversal underscores the growing distress gripping Russia’s industrial economy amid sanctions, shrinking demand, and structural decline.

The financial disclosure, published via Interfax, reflects results from NLMK’s main production site in Lipetsk and is not consolidated across the entire group. Nonetheless, the deterioration is significant: revenue fell -14% year-on-year to 163.3 billion rubles, gross profit dropped nearly -48%, and operating profit collapsed more than elevenfold—from 41.3 billion rubles in Q1 2024 to just 3.8 billion rubles in Q1 2025. Accounts receivable also fell sharply, by over -25%, signaling declining future inflows.

These figures are part of a broader collapse across Russian heavy industry. While state media continues to promote a narrative of economic resilience, core export sectors such as steel, chemicals, and machinery are being hollowed out. Sanctions have severed access to key markets, parts, and financing channels. At home, weak consumer demand and the redirection of public funds toward war spending have left industrial output teetering.

Steel production, long a symbol of industrial strength, is now one of the clearest indicators of systemic decline. Russian firms such as NLMK, Severstal, and MMK are facing falling global competitiveness, logistical bottlenecks, and increasing reliance on politically unstable trade routes. Construction activity has slowed. Investment is drying up. And government procurement, while rising in some defense-related segments, cannot fill the gap left by lost export volumes.

For NLMK, which traditionally ranks among the top steelmakers in Russia and Europe, the loss is not only financial—it’s strategic. The company’s vertical integration and prior global success have made it a bellwether of broader economic health. If even NLMK is operating at a loss, it suggests deepening dysfunction across the entire sector.

This collapse is also exposing the failure of Russia’s much-trumpeted “import substitution” policies. Industrial firms remain heavily dependent on foreign technology, components, and expertise. In many cases, sanctioned equipment cannot be maintained or replaced, leaving production lines vulnerable to breakdown and decline.

Despite rhetoric from the Russian dictator claiming that the economy is adapting successfully to wartime realities, results from the country’s largest industrial players tell a different story. When one of the Kremlin’s flagship companies swings from multi-billion ruble profits to outright losses in a single year, it’s no longer just a bad quarter—it’s a flashing red warning light.

NLMK may find short-term relief through state support or selective exports, but the overall trajectory is clear. Russia’s industrial core is shrinking, destabilizing, and becoming increasingly dependent on coercion and central planning to survive. The collapse is no longer theoretical—it’s in the ledgers. Especially since Russia’s agricultural sector is also experiencing Armageddon.