Steel industry in Southeast Asia: drowning in capacity, struggling to be green

A recent message from the Secretary General of the Southeast Asian Iron and Steel Industry Confederation (SEAISI) highlights a major challenge facing the ASEAN steel industry: excess capacity. Here's a breakdown of the issue and the industry's initial steps towards solutions.

Addressing ASEAN’s steel overcapacity

- Capacity explosion: 

Since 2011, large-scale steel mills have been built across ASEAN, leading to a projected total capacity of 184.5 million tonnes (MT) by 2029-2030. That significantly outpaces the current demand of 78.1 MT.

- Impact of overcapacity: 
A case study mandated by SEAISI in Malaysia demonstrates how excess capacity can lead to price competition, export surges, and financial losses for producers.

Another worry: a shift towards ‘dirty’ technology

The SEAISI Secretary General raises concerns about investments flowing toward older, more polluting Blast Furnace (BF) technology instead of cleaner Electric Arc Furnace (EAF) systems. This trend contradicts ASEAN's Net Zero commitments.

‘I believe (...) potential investors should also review their various proposals to bring in green technology to ASEAN.’
Wee Jin Yeoh, Secretary General - South East Asia Iron & Steel Institute

A hope signal for sustainable development of Southeast Asia's steel industry

To address overcapacity and realign the industry with the New Industrial Master Plan (NIMP) 2030, the Malaysian government implemented a two-year moratorium on new steel mills starting August 15, 2023. This freeze encompasses all inquiries, application reviews, new applications, license transfers, extensions, regularization, and diversification for iron and steel manufacturing licenses.

Additionally, the Malaysian Ministry of Investment, Trade and Industry (MITI) established an independent special committee to explore pathways for sustainable development in the steel industry.

All in all, the challenges facing Southeast Asia's steel industry are complex, but recent developments offer a chance for a positive turnaround. The proactive measures taken by Malaysia – the moratorium on new mills and the formation of a dedicated committee – offer a glimmer of hope and have the potential to pave the way for a more sustainable future for the region's steel production.

In the picture, the Petronas Twin Towers in Kuala Lumpur, Malaysia. Image by Engin Akyurt from Pixabay


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