The aggressive expansion of steelmaking capacity in Southeast Asia, predominantly through the blast furnace-basic oxygen furnace (BF-BOF) route with high carbon emissions, is likely to be unsustainable, according to Yeoh Wee Jin, secretary general of the South East Asia Iron and Steel Institute (SEAISI).

Yeoh's remarks were made during the SEAISI Conference & Exhibition in Da Nang, Vietnam, where he highlighted the region's projected steel production capacity growth of 104.4 million metric tons to 182.5 million metric tons by 2029-30, if all planned additional capacity comes online.

The BF-BOF route, which is the most common for producing higher-grade steel, accounts for an increase of about 73.7 million metric tons from 2021 levels. In contrast, the direct reduction of iron and electric arc furnace (EAF) routes will only contribute around 20.8 million metric tons to the capacity increase.

Despite being more carbon-intensive, emitting 2.33 metric tons of CO2 per ton of crude steel compared to 0.68 metric tons for the EAF route, the BF-BOF route remains the preferred choice for expansion.

According to SEAISI's estimates, with more new capacity realized via the BF-BOF route, approximately 83% of carbon emissions in the ASEAN-6 countries will originate from blast furnaces.

While the region may have advantages in carbon capture, utilization, and storage due to abundant forests for generating carbon credits and depleted oil and gas wells for carbon storage, the overall sustainability of the planned capacity expansion remains a concern.

Yeoh acknowledged the challenges faced in 2023, including weaker external demand, high inflation, interest rates, and tightening global financial markets. However, he expressed optimism for 2024, citing expectations of strong economic growth driven by factors such as private consumption, infrastructure projects, tourism recovery, and a rebound in the electronics sector.

Nonetheless, Yeoh cautioned against overlooking risk factors like geopolitical tensions, supply chain disruptions, weakening ASEAN currencies (except the Singapore dollar), global economic slowdown, and extreme weather events.

To address the challenges of decarbonization, Yeoh emphasized the need for developing renewable energy infrastructure, significant government support, and facilitating transition financing. He also highlighted the importance of multilateral development banks in derisking first movers, creating green steel demand, supporting hydrogen and utility-scale renewables, and enabling ecosystem development.