The Russian government will pour $US250 million into modernising the production of special steel alloys. The lack of modern technology is holding back the production of ultra-strong alloys and steel currently used in aerospace and shipbuilding.

Russian Prime Minister Viktor Zubkov launched the first modern smelting furnace in the Moscow region. The government plans to commission another three furnaces by the end of the decade. 

The modernised plant will produce 2.5 tonnes of high quality alloys and special steel per day. It's used by domestic aircraft makers Sukhoi, Mig and Tupolev.

“Production of ultra strong alloys and steel dropped dramatically in the nineties and hampers the development of hi tech industries,” Zubkov stated.

Russian officials say it's currently a low-profit, niche product, but that could change.

“The consolidation of aviation, shipbuilding and aerospace industries into state corporations will help to increase orders for special steel producers,” said Deputy Industry Minister Andrey Dementyev.

The government also promises to provide state-backed credits for steel producers to buy new equipment.