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Russia considers a moratorium on the bankruptcy of metal giants with indebtedness

A government document published on Wednesday showed that Russia was considering a moratorium for bankruptcies within the metals sector. This is a sign of increasing concern over a struggling industry battling with falling demand and high interest rates, as well as a strong rouble.

In the document, which was a protocol of the meeting held by the Financial Stability Commission on August 28, the ministry of economy and the ministry for industry were asked to submit proposals on October 28 regarding the feasibility of a ban on bankruptcy in the sector.

Kommersant was the first to report on this news.

This move is part of a wider package to support the industry. It follows similar measures taken to assist the struggling coal sector. These included tax deferrals, limiting bonuses and dividends for top managers, and even deferring taxes.

The Economy Ministry declined comment.

Russia will be the fifth largest steel producer in the world by 2024, with a production of 71 million tonnes.

Severstal, one of the country's leading steelmakers estimated in July that steel demand had fallen by as much as 15% during the first half due to high interest rates. This, combined with low prices, caused a 55% drop in the net profit of the company in the second quarter.

On September 12, the central bank board will meet to determine the key interest rate. The analysts polled expect a 200 basis point cut as the economy has slowed faster than expected and inflation is declining.

The Russian economy will slow down to 1.2% from 4.3% growth last year.

In a January research note, a think-tank that advises the government stated that Russia may face a wave corporate bankruptcies as the percentage of companies with high levels of risky debt will double by 2024.

The central bank and government dismissed these warnings by saying that the situation was in control. (Written by Gleb Brynski; Additional Reporting by Darya Korsunskaya; Anastasia Lyrchikova; Gleb Stolyarov, Editing by Guy Faulconbridge & Jan Harvey).

(source: Reuters)