The Southeast Asian steel industry could be hit by higher scrap prices as a result of 25% US tariffs on steel imports, warns Tan Ah Yong, secretary general of the South East Asian Iron and Steel Institute (Seaisi). This could be a more significant threat than the diversion of steel trade from the US to Asian markets, he cautions. Tan will be speaking at the Kallanish Asia Steel Markets conference in Ho Chi Minh City on 18 April.

Tan said in his monthly address that the signing of import duties of 25% on steel and 15% on aluminium was the biggest news of the last month. It has launched a flurry of activity by other countries to secure exemptions. He also notes however that none of the Asean economies is in the top ten countries supplying the USA. Vietnam is likely to be the most affected as it is the 12th largest supplier to the US market.

A diversion of steel flowing from Asean’s northern neighbours is also not a key concern. Asean’s largest steel supplier is China, but China shipped only around 700,000 tonnes of steel covered by the duties to the US in 2017. Among the countries which have been selling more steel to Asean, Russia, Turkey and India combined shipped 6.5 million tonnes of steel covered by the duties to the US in 2017. It is unclear how much of this would flow to Southeast Asia however.

A more direct threat may come from an increase in scrap prices, Tan warns. Around 70% of US steelmaking is based on EAFs, and an increase in output would reduce scrap availability for export. Blast furnace raw materials costs are already looking more competitive than scrap-based EAFs. That could reduce the competitiveness of EAF producers in Southeast Asia relative to the blast furnace-based steelmakers in countries such as China.