The Southeast Asian iron and steel market is experiencing a sluggish year, yet the prospects for steel production capacity in the coming years are anticipated to soar, consequently driving a substantial surge in demand for iron ore and scrap steel.

At a recent conference on recycled materials in the Southeast Asian region held in Bangkok, Thailand's capital, experts voiced the viewpoint that Southeast Asia, unlike many other Asian regions such as China and Japan, is poised for significant changes. The area is shifting towards utilizing iron ore and steel processing through blast furnaces powered by coal (BF) and basic oxygen furnaces (BOF) over the next decade, partly due to substantial investments from China. This implies that the region will not only witness a steep increase in iron ore demand, but according to senior analyst Alexander Kershaw of Fastmarkets, he also forecasts a 50% surge in scrap steel demand within the next 10 years.

Steel production capacity in Southeast Asia is currently on a strong upward trajectory. According to the Southeast Asian Iron and Steel Institute (Seaisi), Malaysia is projected to add 30 million tons of new capacity each year, with 21 million tons per year set to commence production by 2024. Indonesia is also set to augment an additional 3 million tons per year by 2023 and 5.2 million tons per year by 2026, along with an extra 17 million tons per year with completion dates yet to be confirmed. China has also made significant investments in BOF facilities under construction in countries like the Philippines and Cambodia.

If all these new steel production capacities are realized as planned, the average gross growth rate of BOF technology in the region is set to increase by 25% between 2020 and 2026. In contrast, the expansion rate of electric arc furnace (EAF) technology, which utilizes more scrap materials, is predicted to be merely 1% from 2020 to 2026, as estimated by Seaisi in 2022.

According to Seaisi, by 2026, steel production from iron ore will account for 57% of the overall steel production capacity in Southeast Asia, compared to just 5% in 2011. In contrast, steel production from scrap steel is expected to decrease to 36% by 2026 from the higher figure of 95% in 2011.

Source: CafeF