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Posted on 25 Jul 2022

How Much New Investment in Steel Industry Change Steel Production Structure in ASEAN-6?

Huge capacity investment projects are flooding into the ASEAN-6 region, focusing mainly in Indonesia, Malaysia and Vietnam. ASEAN steel industry’s structure will change dramatically.

There will be a 30 million tonnes new capacity of steel production in Malaysia, around 21 million tonnes out of which is confirmed to commence in 2024 whereas the other investment projects have not confirmed the completion year. Major investors are WenAn Steel, Alliance Steel, Oriental Shield and Eastern Steel.

As for Indonesia, there are investment projects from a total five companies. Major investors include Dexin Steel, Krakatau Steel/ Kakatau Posco, Fuhai Indonesia, Hebei Bishi Group and Gunung Group. With these, there will be additional 4 million tonnes of new capacity expected in 2022, 3 million tonnes in 2023 and 5.2 million tonnes in 2026, whereas the other investment projects of 17 million tonnes have no confirmation of completion year.

In Philippines, two projects of 12 million tonnes will take place and plan to complete. Major investors are Panhua Group and SteelAsia Group.

There will be additional 20 million tonnes production capacity in Vietnam within 2023. The major investors are the existing companies, namely, Pomina Steel, Hoa Phat Group and Formosa Ha Tinh with total investment at 6 million tonnes within 2023. On the other hand, there is no further news on the potential 14 million tonnes from Formosa Ha Tinh since this was reported some time ago.

If all integrated mill capacities come on stream, there will be more than 90 million tonnes of steel production in the region, increasing from a current 71.8 million tonnes. By 2026 there will be a shift from scrap base production to an iron ore base production in the ASEAN-6.

According to Mr. Yeoh Wee Jin’s speech at 2022 ASEAN Raw Materials & Scrap Focus Event organized by SEAISI, the average compound growth rate of BOF technology from 2011 to 2020 increases 32% and it will continue to expand 25% in a period 2020-2026. Meanwhile, the expansion of EAF technology is only 5% from 2011 to 2020 and 1% from 2020 to 2026. As a result, there will be a significant structural shift from 95% of scrap base industry in ASEAN-6 in 2011 to 36% of scrap base industry in 2026. Share of BOF technology will shift from 5% in 2011 to 57% in 2026.

As a result, there would be a shifting of trade flows of iron ore into ASEAN region. Demand for scrap would not change much. On the other hand, there will be more need for iron ore. Currently, major sources of iron ore import within ASEAN-6 were Brazil and Australia. Majority of the import was to Malaysia (more of a transshipment centre), Vietnam and Indonesia as major consumers.