Home / Commodities / Commodity News / Southeast Asian steel capacity expansion unsustainable: SEAISI

Southeast Asian steel capacity expansion unsustainable: SEAISI

Aggressive expansion of steelmaking capacity in Southeast Asia, predominantly via the blast furnace-basic oxygen furnace route based with high carbon emissions, was likely to be unsustainable, Yeoh Wee Jin, secretary general of South East Asia Iron and Steel Institute, said during the SEAISI Conference & Exhibition in Da Nang, Vietnam.

Southeast Asia’s steel production capacity was expected to grow 104.4 million mt to 182.5 million mt by 2029-30 if all planned additional capacity comes on stream.

For the BF-BOF route, the increase in capacity will be about 73.7 million mt from 2021, whereas the direct reduction of iron and electric arc furnace routes will only account for about 20.8 million mt of the capacity increase.

The BF-BOF route is the most common for producing higher grade steel, despite much higher emissions of 2.33 mt CO2 per ton of crude steel, whereas the EAF route only emits 0.68 mt CO2 for the same volume of output.

With more new capacity to be realized via BF-BOF, it was estimated that about 83% of carbon emissions in the ASEAN-6 countries will be from blast furnaces, according to SEAISI.

Compared with investment into new technology in the EU, ASEAN countries may have more advantages in carbon capture, utilization and storage because the region has abundant forests to generate carbon credits and many depleted oil and gas wells for carbon storage.

Yeoh also said 2023 had been a challenging year given weaker external demand, high inflation and interest rates, and tightening of the global financial markets, while 2024 was expected to see an improvement.

“ASEAN-6 governments are optimistic about strong economic growth, on the basis of strong private consumption, rolling out of infrastructure projects, a recovery in tourism, a rebound in the electronics sector and declining inflation,” Yeoh said.

But there were also risk factors that cannot be neglected, including rising uncertainty due to geopolitical tensions and interruptions to the supply chains, weakening ASEAN currencies except the Singapore dollar, economic slowdown in China and the whole world, and extreme weather shocks.
Amid such challenges, Yeoh said: “Key upcoming drivers of decarbonization include the development of renewable energy infrastructure, significant government support, and the facilitation of transition financing”.

With the steel industry having seen its first batch of pioneers investing in new technologies, representing 1.7% of global production, with 50%-60% project funding in Europe, further development of renewable energy infrastructure such as hydroelectric, solar, and biomass mediums in ASEAN was needed.

Likewise, increased development of Hydrogen production hubs for all industries is essential in the green energy movement, with ASEAN and Malaysia’s natural abundance of natural gas placing it in good stead for such a transition.
The role of multilateral development banks (MDBS) in steel decarbonization was also crucial for achieving global climate goals, in derisking first movers, creating green steel demand, supporting hydrogen and utility-scale renewables, and ecosystem enablement.

With a majority of ASEAN countries having announced targets to achieve zero-carbon emissions, strengthening international, cross-industry, financing and government support will be needed for steelmakers in the region to continuously survive and thrive in a decarbonized world.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping