September 17, 2019 / 12:35 PM / a month ago

Severstal to tap Russian demand for stainless steel with U.S. investment

FILE PHOTO: The logo of steelmaker Severstal is seen at the company's plant in Cherepovets, Russia October 22, 2018. REUTERS/Polina Ivanova/File Photo

MOSCOW (Reuters) - Severstal, Russia’s third-largest steelmaker, has invested in Arcanum Alloys, a Michigan-headquartered company that develops new steel-based alloys, to obtain technology which will allow it to tap Russian demand for stainless steel.

Russia exports some steel products but has to rely on imports of stainless steel to cover the bulk of its domestic needs of about 370,000 tonnes worth about $700 million a year.

“Russia remains a big net importer of stainless steel; with this innovative product we hope to offer to our domestic clients a better alternative to certain stainless steel grades,” Andrey Laptev, Severstal head of business development, said in a statement on Tuesday.

The company aims to obtain a 10% share of the Russian market, it said, signalling stronger competition for foreign firms. China, Taiwan and India are currently the largest suppliers of stainless steel to Russia.

Severstal, controlled by Russian billionaire Alexey Mordashov, invested $6 million in the last funding round of Arcanum Alloys, it said, adding that the U.S. venture capital firm Khosla Ventures was also among investors.

Russian investment deals in U.S. companies have become scarce in recent years amid poor political relations between the two countries.

Western countries have imposed several rounds of sanctions on Moscow and some Russian companies since Russia annexed Crimea from Ukraine in 2014. Severstal has not been targeted by these sanctions.

Arcanum Alloys has developed a technology which allows it to produce a product with corrosion properties equivalent to stainless steel, at lower operational and capital costs, Severstal said.

The product is aimed at the automotive and construction industries, and Severstal plans to propose to its clients steel produced using Arcanum Alloys’ technology by 2020.

Reporting by Polina Devitt; Editing by Bernadette Baum

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