Creativity and collaboration: inside Russia’s first full-scale steel accelerator programme
Russia’s fourth-largest steel producer Severstal is committing up to $25m a year to programmes to support startups promising innovation in the steel sector. JP Casey spoke to Severstal director Andrey Laptev about the SteelTech Accelerator programme spearheading the initiative.
The Russian steel industry has been a hugely productive enterprise on paper. With annual production increasing over the last decade from 60.0 million tonnes (Mt) in 2009 to 71.7Mt in 2018m and exports rising from 29.3Mt to 33.3Mt over the same period, steel has been a reliable and growing source of income and trade since the turn of the millennium.
However, the future of the industry is less secure, with the World Steel Association (WSA) reporting at a 2017 conference in Istanbul that a decline in Chinese demand for steel, and a general slowdown of growth internationally, could limit or even reduce the growth of the steel industry over the next few years. Russia itself faces an issue of a lack of diversity in its steel sector, with 91% of the country’s 2017 steel output coming from just five companies, prompting the industry’s key players to look for innovation and fresh ideas in the sector.
To this end, Severstal, Russia’s fourth-largest steel company in 2017 with an end-of-year production of 11.7Mt, has launched its SteelTech Accelerator, an ambitious programme to fund metallurgical start-ups offering new technologies to solve challenges in the steel sector. The winning applicants will be given access to laboratories, mentors and the ability to work with Severstal itself to scale up their solutions and introduce their technologies to the industry.
More than half of the country’s coal mines are managed by pro-Russian separatist militia.
New technology in an established industry
“As far as we are aware, SteelTech is the first startup accelerator programme in the world dedicated to innovations for the steel industry,” said Andrey Laptev, director for business development and corporate venture projects at Severstal, and he may well be correct. While other programmes have offered similar opportunities, such as the Y Accelerator scheme for manufacturing start-ups based in the UK, none have focus, nor come close to the scale and scope of the SteelTech scheme.
Severstal will look for projects from both within the company and without, focusing on schemes that have been developed at least to the point of working prototypes. The projects should be “in revenues, with differentiated technology and strong market potential,” according to Laptev.
“Successful applicants will work with over 50 expects for four months to refine their solutions, with more than 80 hours spent in one-on-one lessons with industry experts.”
Successful applicants will work with over 50 expects for four months to refine their solutions, with more than 80 hours spent in one-on-one lessons with industry experts. Severstal also offers applicants the chance to sign a contract for a trial scheme with Severstal, and the scheme will commit around $16m a year into winning start-ups, a level of financial backing and industry expertise rarely seen in the metals sector.
“Steel is sometimes seen as a rather traditional, slow-moving industry where breakthrough innovations are rare and the pace of new products and market development is slow,” said Laptev. “We must find new ways to source fresh ideas, develop new products and create new businesses to complement our core.”
The issue of innovation is particularly important for the steel industry, where processing has remained largely unchanged since the popularisation of basic oxygen steelmaking (BOS) and electric arc furnace (EAF) processes in the mid-20th century. In a 2018 report, the WSA ranked countries by annual steel production as of 2017, and identified countries responsible for 99.9% of the year’s steel production. In these countries, BOS and EAF processes were responsible for 99.5% of steel production, a total of around 1.6 billion tonnes.
More than half of the country’s coal mines are managed by pro-Russian separatist militia. Credit: DmyTo/Shutterstock.
Better processes and better relations
Modernising the steel sector and creating strong bonds between Severstal and the start-ups are two of the key ideas underpinning the initiative. Laptev divided the former into the “relatively straightforward” solutions of cutting costs and introducing new products to steel production, and more complex plans to reduce and process waste and more effectively integrate digital platforms into the industry.
The WSA, of which Laptev is chair of its product sustainability committee, has broad targets to turn steel into a circular economy, one that maximises efficiency and minimises waste, to ensure the industry remains sustainably profitable. The association reported in 2016 that the steel industry is recycling 97.6% of the raw materials used in the manufacture of steel, converting them to steel products and by-products, and Severstal’s attempts to modernise the Russian sector aims to push this percentage higher.
“Severstal is also pursuing projects such as Severstal Ventures, a venture fund used to support disruptive technologies.”
The SteelTech programme is also just one part of Severstal’s wider plan to engage more directly with start-ups. Alongside projects such as Severstal Ventures, a venture fund used to support disruptive technologies in particular, the company plans to invest up to $25m per year into a number of start-ups across the steel and metallurgy sectors.
“We strive hard to make ourselves a great partner,” said Laptev. “Despite the size of the company, we aim to get things done quickly, avoid excessive bureaucracy in all types and forms, and to be flexible and ready to experiment. For startups, which often have limited budgets and a limited amount of time to ‘make it happen’, speed and agility can be critical qualities that they often miss in big corporations. We will do our best not to disappoint them.
“For the global steel industry, improving our ties with technological companies, innovative community and startups is quickly becoming a necessity,” said Laptev. “The companies that will lead the change will reap the most benefits.
More than half of the country’s coal mines are managed by pro-Russian separatist militia.Credit: DmyTo/Shutterstock.
A naturally global industry
Creating a process by which new technologies can be developed alongside industry majors, and integrated into their operations, could help embedded these solutions more effectively into the steel industry, and generate value for the companies backing them.
“We believe that participating in our accelerator will give startups a great opportunity to have unrivaled access to potential customers,” said Laptev. “We would be also very interested to consider investing directly in startups that would be relevant to our strategy and which could provide benefit to Severstal as an investor.”
Should the SteelTech programme be successful, the global steel industry could benefit from improved relations between entrepreneurs and miners, alongside the effective integration of new technology into established processes, a combination of benefits that the sector has lacked in years past.
“A quarter of the world’s steel is traded internationally, so backing technologies from around the world, which can then go on to be deployed around the world, could have international benefits.”
The world’s first commercial steel plant to use the hydrogen-based circored process, instead of the typical BOS and EAF methods, opened in Trinidad and Tobago in 1998. The process was technologically sound – reusing hydrogen from local petroleum facilities to heat iron, removing impurities and producing high-quality steel without having to invest in blast furnaces to heat the ore – and economically efficient, pushing the country’s annual steel production to a peak of 83,000 tonnes in 2003, according to the WSA. However, the plant’s owner, ArcelorMittal, shut down the facility in 2016 following disputes with workers, sending the country’s steel output to negligible levels, from which it hasn’t recovered.
Laptev also points out that more than a quarter of the world’s steel is traded internationally, so backing technologies from around the world, which can then go on to be deployed around the world, could have international benefits.
“Steel is by nature a global industry,” said Laptev. “Market fluctuations in every part of the world have immediate impact on all of us. So we believe that it is more appropriate to discuss the industry on a global level, rather than on a country or regional one.”