The ASEAN steel industry needs the support of its governments, large funding and viable technologies in order to survive and thrive as the industry looks to decarbonise.

The industry is already taking steps to address some of these issues, Kallanish heard at Monday’s South East Asia Iron & Steel Institute (SEAISI) conference in Da Nang. “We are expecting a tough journey ahead,” SEAISI chairman Dato’ Lim Hong Thye told delegates.

The regional steel industry is already in overcapacity and this will worsen. Current capacity in ASEAN could rise from 78.1 million tonnes/year to 188.5m t/y by 2030 if announced projects materialise. The new steel capacity of 110.4m t/y includes 73.7m t/y of blast furnace capacity and 20.8m t/y of DRI and/or EAF capacities.

This huge potential growth does not include the rapid rise in capacity via induction furnaces in countries including Indonesia, Malaysia and Thailand. “To make things worse, these potential new investments are proposed and/or carried out by investors outside Southeast Asia and are mostly concentrated in commodity or low-grade steel products,” Lim added.

Aside from high volumes of steel trade within the ASEAN region, which will worsen price competition, Chinese steel exports have also been rising strongly. China’s finished steel exports increased by 37% from 63mt in 2022 to 86mt in 2023. SEAISI expects Chinese steel exports could continue to increase in 2024 because of China's weak economic situation, Lim noted.

There is tremendous pressure for the regional steel industry to decarbonise because carbon emissions will rise sharply due to new blast furnace capacities and expansions. SEAISI and its associate, the ASEAN Iron and Steel Council, have taken several key steps in government engagement and with ASEAN council representatives.

Lim noted the Malaysian government has recently imposed a two-year moratorium on issuance of new steel mill licenses and set up an independent committee to look into and review the sustainable development of Malaysia’s steel industry. “[SEAISI] members are also being urged to start preparing for decarbonisation, including to start measuring carbon dioxide and other green house gases emissions,” he said.

Without government support and massive funding, it will be a "tough order" for the industry to overcome the challenges of decarbonisation. The EU steel industry is receiving strong government support in the form of massive subsidies and grants, Lim observed. Transitional financing from multi banks, local and other banks is also crucial for funding solutions. The current technology favouring DRI production is not viable for steel mills in ASEAN because DRI is not priced low enough in the region, he concluded.