ASEAN countries are taking important steps towards decarbonisation and policies on the sustainable development of the regional steel industry, Kallanish notes. But these countries also face challenges and they need a policy framework to support their energy transition efforts, according to OECD structural and industry policy division head Stephan Raes.

Regional countries remain net importers, despite in combination being the sixth-largest steel exporter with rapid growth since 2017. Certain countries, such as Thailand, Vietnam, Indonesia and Malaysia, are very export oriented, with steel shipments abroad accounting for a large share of crude steel production. Exports may further increase due to growing capacity.

The countries are nevertheless exposed to carbon-related border restrictions, as China, Japan, Canada, the EU and US are important export destination markets, Raes said at the Vietnam Steel Association’s “green growth strategy” conference in Hanoi this week.

Foreign steel investments in ASEAN are large, carbon-intensive and mostly involve subsidised Chinese state-owned enterprises (SOEs), he added. Solely-owned Chinese investments involve 43.4 million tonnes of steel capacity, averaging 6.2mt of mainly blast furnace/BOF route production. For joint ventures with Chinese investment, they are in total 19.3mt and the average plant size is 2.1mt.

Chinese SOEs receive about 40% more subsidies than privately owned Chinese companies per tonne of production capacity and have easier access to funding in China, Raes observed. On the other hand, investments by domestic steel producers in the region total 8.5mt and involve mostly much smaller plants.

Given the above linkages with Chinese demand for and participation in regional steel, Raes said questions are raised on how falling steel demand in China will affect global markets and ASEAN producers. These issues include potential oversupply, low prices, trade friction, carbon-related border restrictions and their impact on the low-carbon transition of steel in ASEAN.

On a positive note, nearly all ASEAN countries have announced net-zero carbon targets. Indonesia, Thailand and Vietnam are developing carbon-tax and ETS frameworks, he noted.

But various challenges exist, including access to clean technologies, to capital to finance the transition, and to affordable raw materials including scrap and clean energy for the transition. Raes highlighted the importance of scrap availability, noting that export restrictions on scrap are rising.

The strengthening of global cooperation is the way forward to support the sustainable development of the ASEAN steel industry, according to Raes. He encouraged a platform for open discussion between government and industry stakeholders to work together to avoid excess capacity, promote open and stable steel markets, ensure supply of raw materials and foster decarbonisation.