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Key takeaways:
New steelmakers in Southeast Asia are intending to go green. They aim to differentiate themselves from the growing production glut and oversupply in the seaborne markets.
Out of the planned upcoming steelmaking projects in Southeast Asia, several of them have designated themselves as green. Meanwhile, the decarbonization movement in the global steelmaking industry continues to grow in momentum.
Meranti Green Steel, for instance, is positioning itself as the region’s first green steel business. It plans to utilize direct-reduced iron (DRI) with increasing hydrogen integration. This will be coupled with electric arc furnaces (EAFs) powered by renewable energy in Thailand.
The company aims for an initial 70% reduction in carbon dioxide emissions compared to conventional blast furnaces. They have ambitions for full green hydrogen use. It has also signed offtake contracts with Anglo American for iron ore pellets and lumps to feed its DRI operations. These will, in turn, produce green hot-rolled coil (HRC).
Green Esteel has also launched a 2.5 million tonnes per year (tpy) hot-briquetted iron (HBI) plant in Sipitang, Malaysia. In this plant, Japanese trader Hanwa had previously announced that it would invest to gain right of sales for HBI produced by Esteel Group, including for exports to Japan.
The HBI plant will use natural gas for reduction. Furthermore, Green Esteel is looking to subsequently add more DRI and steel production facilities.
This is not the only HBI plant coming onstream in Malaysia.
Maegma Minerals, part of Kuala Lumpur-based Melewar Group, signed a memorandum of understanding with Primetals Technologies on June 10 this year. The goal is to establish a 2 million tpy HBI plant in Lumut, Perak.
Market sources have regularly raised the alarm about the growing steel production capacity and oversupply in the seaborne markets in Southeast Asia. They point out that it could potentially turn into the next net steel exporter. This is especially relevant in the backyard of major steel producer China. China is presently still exporting large quantities of semi-finished and finished steel across the entire spectrum of flats and longs to the rest of the world.
The Southeast Asia Iron and Steel Institute (SEAISI) has projected ASEAN-6 crude steel capacity to surge from 78 million tpy in 2022 to an estimated 94 million tpy in 2024. It is expected to reach a staggering 182.5 million tpy by 2030.
Market sources said such rapid expansion typically outstrips regional demand growth. It risks suppressing prices while also inviting trade defense actions, like those seen against Chinese exports.
Vietnam’s largest steelmaker, Hoa Phat Group, is pushing ahead with ambitious expansion plans. The plans aim to boost its crude steel production capacity to 16 million tpy, even as concerns about overcapacity grow in Southeast Asia.
The company announced on August 7 that Blast Furnace No1 at its Hoa Phat Dung Quat 1 Project has resumed operations. This follows scheduled maintenance. The restart of the 1,080 cubic meter furnace, one of four at the facility, each with a capacity of 1.0-1.2 million tpy, is expected to bolster sales volumes in the second half of the year. This will stabilize domestic steel output amid rising demand.
Hoa Phat is simultaneously progressing with the second phase of its Hoa Phat Dung Quat 2 Project in Quang Ngai province. It is scheduled for completion in September 2025. This 85 trillion Vietnamese dong ($3.4 billion) expansion will introduce two new blast furnaces. Each has an estimated volume of 2,500 cubic meters and a capacity of 2.5 to 2.8 million tpy.
Upon completion, Hoa Phat’s total crude steel capacity will reach 16 million tpy, including 9 million tpy of HRC. The company has previously indicated a long-term target of 21 million tpy by 2029.
Other projects that are expected to come onstream include Alliance Steel’s expansion to 10 million tpy capacity. They also include Krakatau Steel/Krakatau Posco’s expansion of another 3 million tpy capacity, Wenan Steel’s targeted 10 million tpy capacity, and Hebei Bishi’s targeted 3 million tpy capacity.
The expansion of blast furnace-based steelmaking capacity has brought renewed focus to the evolving demand for steelmaking raw materials.
This trend is underscored by the recent restart of Hoa Phat’s blast furnace. This has sparked renewed interest in the scrap market.
Blast furnaces typically use around 10-15% scrap in their feedstock. With the current furnace back online and another set to launch as part of the Hoa Phat Dung Quat 2 Project, sources told Fastmarkets that demand for higher-grade scrap material is likely to strengthen.
Fastmarkets’ weekly price assessment for deep-sea bulk cargoes of steel scrap, HMS 1&2 (80:20), cfr Vietnam, was at $335-345 per tonne on August 8, up from $330-340 per tonne the week before.
Fastmarkets’ weekly price assessment for steel scrap, H2, Japan-origin import, cfr Vietnam, was $310-320 per tonne on August 8, up by $5 per tonne from $305-315 per tonne the previous week.
Southeast Asia is also an emerging key buyer of HBI, typically from the Middle East, United States, or Malaysia. Trades are heard regularly to Vietnam for up to 50,000 tonnes. HBI supplements ferrous scrap and serves as a form of low-carbon-emission steelmaking raw material.
Fastmarkets’ fortnightly price assessment for hot-briquetted iron, cfr Asia was $327-330 per tonne on August 1. This narrowed upward from $325-330 per tonne on July 4.
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