 |
| Southeast Asia low carbon steelmaking |
Sustainable Steel Production Gains Momentum in Oversupplied Market
New steelmakers in Southeast Asia are positioning themselves as green to compete against growing blast furnace capacity and oversupply. The region’s steel production is expanding rapidly, raising concerns of a market imbalance. In response, several producers are turning to low-carbon steelmaking as a strategic differentiator.
Meranti Green Steel is leading this shift by deploying DRI technology with hydrogen integration in Thailand. The company will power its electric arc furnaces (EAFs) with renewable energy. As a result, it targets a 70% CO₂ emission cut compared to traditional blast furnace routes. Meranti has also signed offtake agreements with Anglo American for iron ore pellets, indicating strong upstream integration for its green hot-rolled coil (HRC) production.
Meanwhile, Malaysia-based Green Esteel launched a 2.5 million tpy HBI plant in Sipitang. Hanwa, a major Japanese trader, has invested in this project, securing offtake rights for Japanese exports. In parallel, Melewar Group’s Maegma Minerals is working with Primetals Technologies to build a 2 million tpy HBI plant in Lumut. These projects underline Southeast Asia’s emerging role as a low-carbon iron hub.
Overcapacity and Trade Risk Push Demand for Differentiated Steel
Steel capacity in Southeast Asia is projected to more than double by 2030. According to SEAISI, ASEAN-6 crude steel capacity will reach 182.5 million tpy by 2030, up from 78 million tpy in 2022. In contrast, demand is not growing at a comparable pace. This imbalance heightens price suppression risk and invites trade defense actions, similar to those imposed on Chinese exports.
Vietnam’s Hoa Phat Group continues expanding despite overcapacity concerns. On August 7, it restarted a 1,080 m³ blast furnace at its Dung Quat 1 Project. The firm also progresses with the Dung Quat 2 expansion, due in September 2025. This phase will add two 2,500 m³ blast furnaces, increasing its crude steel capacity to 16 million tpy.
In addition, Alliance Steel, Wenan Steel, Hebei Bishi, and Krakatau Posco are all scaling up, potentially contributing to a glut. This trend intensifies the importance of sustainability as a market advantage. Green steel offers a pathway for regional producers to avoid anti-dumping measures and appeal to decarbonization-driven buyers.
Scrap and HBI Markets React to Shifting Production Methods
The return of blast furnace operations has renewed demand for high-quality steel scrap. Fastmarkets assessed HMS 1&2 (80:20), cfr Vietnam, at $335-345/tonne on August 8, up from $330-340 the week before. Similarly, Japanese H2 scrap imports rose by $5 to $310-320/tonne, signaling stronger appetite among integrated mills.
However, green steelmaking requires different feedstocks. DRI-EAF routes, especially those integrating hydrogen, prefer low-residual inputs like HBI and premium scrap. Fastmarkets assessed HBI imports into Asia at $327-330/tonne on August 1. Vietnam regularly trades up to 50,000 tonnes of HBI per cargo, reflecting its role in low-carbon steel supply chains.
Therefore, Southeast Asia’s shift to green steel is changing the regional raw material mix. Traditional scrap remains relevant, but demand for clean iron sources like HBI is gaining traction. This could impact global trade flows and open new sourcing routes from the Middle East and the Americas.
ScrapInsight Commentary
Southeast Asia’s emerging green steel sector represents a strategic pivot amid looming overcapacity. While traditional blast furnace output grows, green DRI-EAF investments provide resilience against trade barriers and carbon regulations. We expect continued growth in HBI demand, with scrap markets bifurcating based on quality and carbon intensity. Long-term, regulatory pressures and green procurement policies will define competitiveness in this crowded market.
