London (Platts)--11Feb2013/721 am EST/1221 GMT

Finnish steel and engineering group Rautaruukki said Monday it has started developing new grades of iron pellets together with partner Severstal Group of Russia, following a raw materials accord between the two companies last year.

The Ruukki Metals unit will test new pellets produced by Severstal's PJSC Karelsky Okatysh, as it seeks to diversify supplies from Sweden's LKAB.

The partnership aims to increase the steelmaker's purchasing options, and by developing new pellets based on the operating specifications of Ruukki's furnaces can improve the overall efficiency of the steel-making process, Ruukki said in a statement.

Tests will be undertaken at Ruukki's Raahe Works and at the University of Oulu, it said.

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Ruukki in May signed a three-year contract with Severstal Resources to supply coking coal and ore pellets with flexible shipment volumes up to a maximum of around 20% of the steelmaker's needs.

Severstal's Karelsky Okatysh pelletizing plant is 20 km (12 miles) from the Finnish border, and delivers product by train.

The coking coal is being sourced from Severstal Resources' metallurgical coal deposit Vorgashorskaya, which is part of the Vorkutaugol complex in northern Russia's Komi Republic. Mining operations at the group's 1 million mt/year of concentrate coal capacity Vorkutinskaya coking coal mine were suspended Monday after a fatal blast.

Ruukki's other coking coal suppliers are in North America and Australia.

--Hector Forster, hector_forster@platts.com
--Edited by Jonathan Fox, jonathan_fox@platts.com

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