The steel production capacity in the ASEAN region is projected to reach 184.5 million tons by 2029-2030, exposing vulnerabilities to carbon regulations like CBAM.
Following China, ASEAN's six major countries are leading the expansion of steel production capacity alongside India and the Middle East, with a significant increase expected by 2030, which will also result in a substantial rise in carbon emissions.
On May 27 (local time), the South East Asia Iron and Steel Institute (SEAISI) released a report on the steel demand outlook and capacity expansion of the six major ASEAN countries: Vietnam, Indonesia, Malaysia, Thailand, Singapore, and the Philippines.
According to the report, SEAISI projects steel demand in the six major ASEAN countries to reach approximately 78 million tons in 2024 and about 80 million tons in 2025.
Additionally, with large-scale steel projects under construction by both regional and foreign companies, including China, the steel production capacity of these six major ASEAN countries is expected to reach 184.5 million tons by 2029-2030.
Despite this rapid capacity expansion, SEAISI expressed concerns that the regional steel industry could diverge from the global trend toward carbon neutrality.
Currently, most of the new steel production lines in ASEAN are coal-based blast furnaces/oxygen furnaces. This indicates that if ASEAN countries continue to encourage such investments without implementing carbon capture, utilization, and storage (CCUS) systems, the region's steel industry's carbon emissions will inevitably surge.
In fact, according to SEAISI's data released last year, 76.9 million tons of new crude steel production capacity will be operational by 2026 due to ongoing 'blast furnace projects' in the region, while new electric arc furnace production capacity will be only 2.2 million tons annually during the same period.
By 2028, coal-based blast furnace/oxygen furnace production lines are expected to account for 59% of the regional steel production capacity and 84% of the total carbon emissions of the steel industry.
SEAISI Secretary General Yeoh Wee-jin expressed concern, stating, "The carbon intensity of the steel industry will increase explosively because most of the new crude steel production capacity is blast furnaces."
While green transition is important for the development of the ASEAN steel industry, there are also counterarguments that securing economic viability is even more crucial, and there are concerns about overproduction.
OECD researcher Stephan Raes pointed out, "Anti-dumping investigations surged due to China's overinvestment, peaking in 2015-2016. Overinvestment in steel production capacity in the ASEAN region will have the same effect as China's overinvestment, posing a risk of reducing the economic efficiency of the regional steel industry."
Meanwhile, there are concerns within the local steel industry that the expansion of coal-based blast furnace/oxygen furnace production capacity will make it difficult to cope with carbon border taxes from major export markets such as the EU and the US.
A representative of a regional steel company warned, "The current expansion of blast furnace facilities in the ASEAN region is based on low production costs. Regional steel companies assume they can maintain export competitiveness at the lowest cost and bear the increasing carbon costs, but this is naive. The cost structure will fundamentally change according to the climate change policies of major export markets."
Another local steel company representative emphasized, "With the EU's CBAM being fully implemented and inevitable future carbon regulations, ASEAN steel companies must actively seek ways to produce green steel. The most practical way to achieve decarbonization of the regional steel industry is to significantly increase investment in green technology. Ultimately, securing green production technology through large-scale government funding and securing markets for green steel produced through this technology is the most certain method."
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