Major Russian mining company Mechel reports production cuts amid sanctions and central bank anti-inflation measures

One of Russia’s biggest mining firms, Mechel, has announced it will suspend “unprofitable production” after a sharp fall in revenue. The company reported its earnings had dropped by a quarter in the first half of 2025 due to a range of factors: Western sanctions, the ruble’s exchange rate, and the Russian central bank’s efforts to curb inflation by setting a high key interest rate.

Mechel closed the first half of 2025 with a net loss of 40.5 billion rubles ($460 million), more than double the 16.7 billion rubles ($207.7 million) lost in the same period a year earlier. Revenue fell 26%, from 206 billion rubles ($2.6 billion) in the first half of 2024 to 152.3 billion ($1.9 billion) this year.

In response, management decided to halt “unprofitable product lines.” The company did not specify which products fall under that category, but noted that during the first half of the year it saw a decline in prices for coking coal concentrate, which is used in metallurgy, as well as falling production and sales of thermal coal, anthracite, and pulverized coal fuel due to “market conditions.”

By the start of the second half of the year, Mechel had cut coal mining by 28%. It said the temporary production limits came partly due to repairs at one of its processing plants, which led to a 40% drop in coking coal sales, but also pointed to inflation and sanctions.

“In conditions of inflation, rising costs, a strong national currency, and sanctions, the coal business has come under serious pressure. Under these circumstances, we have decided to suspend unprofitable production lines, partly redirecting resources toward products more in demand today,” the company’s statement said.

Mechel described its metallurgy division as “more stable, but still difficult.” Steel output dropped 10% and production of pig iron 6%, with the company acknowledging a “substantial decline” in profitability. It blamed the central bank’s high key rate along with restricted access to foreign markets.

The company has admitted financial difficulties before. In June it said it would more than halve capital expenditures on equipment and other long-term assets. Analysts, citing its mounting losses and heavy debt burden, have even referred to Mechel as a “zombie company.”

Experts have long predicted a crisis in Russia’s coal sector due to low investment, high debt — including wage arrears — and declining demand. Read more about how Russian companies are coping with this crisis in The Insider’s report on the country’s coal industry.