The slew of new capacity expansions in ASEAN has wide implications for the region, Kallanish notes. In addition to potential massive steel oversupply, the new blast furnace projects are set to reverse the region’s current status as having one of the greener steel industries.

There will be an "explosion" of carbon emissions without carbon capture, utilisation and storage (CCUS) technologies, Wee-Jin Yeoh, Secretary General, South East Asia Iron & Steel Institute, told delegates during Wednesday’s Kallanish Asia Steel Markets 2022 virtual conference.

The growth in regional blast furnace/basic oxygen furnace mega-mills has been rapid and is expected to accelerate, said Yeoh. In 2020, the region's crude steel capacity from EAF mills was 48 million tonnes/year and from blast furnace mills at 22m t/y. This is forecast to jump to 80m t/y from blast furnace mills and 51m t/y from EAFs by 2026. While BOF steel capacity accounted for only 5% of total ASEAN crude steel capacity in 2011, this jumped to 30% in 2020 and will propel further to an estimated 57% in 2026.

The increased blast furnace steel capacities will lead to a surge in carbon emissions from the regional steel industry if CCUS technologies are not implemented. Based on EU benchmarks, Yeoh estimated that the industry gave out 42 million tonnes of CO2 equivalent – 13mt from EAFs and 29mt from BFs – in 2020. This will at least treble to 122m tCO2e – 14mt from EAF and 106mt from BF – in 2026.

These are conservative figures because emissions from coke plants and sinter operations have not been included in forecasts. This means that emissions growth could even quadruple, Yeo observed. In 2026, carbon emissions from regional BOF mills are forecast to account for 87% of carbon dioxide emissions and from EAF mills, 11%.

Mostly China-led, massive steel investments are taking place in Indonesia, Malaysia and Vietnam. The new capacities are a major concern because growth in regional demand is much smaller and lagging behind. For example, Malaysia's domestic demand is up to 10m t/y against the current rated capacity of 16m t/y and potential capacity of 46m t/y if the new capacities are realised.

While Yeo noted that the new capacities are geared for regional exports, especially to China, regional consolidation could help prevent potential steel overcapacity within and out of the region.

 Source: SEAISI