Southeast Asian countries are beefing up efforts to increase crude steel production with an aim to become self-sufficient in steel, raising concerns about a global oversupply.

According to multiple sources from the steel industry on Monday, many countries are making a concerted effort to become self-reliant in steelmaking amid the U.S.-China supply chain conflict.

In particular, Southeast Asian countries are significantly increasing their crude steel production.

Malaysian steelmaker Eastern Steel Sdn Bhd, a joint venture between Malaysia’s Hiap Teck Venture Bhd and China’s Beijing Jianlong Heavy Industry Group Co., began operations of a new blast furnace in August.

The new blast furnace ? located about 60 kilometers north of the eastern port city of Kuantan in Malaysia ? is expected to increase the company’s annual crude steel production capacity to 2.7 million tons from 700,000 tons.

Crude steel is the molten iron from blast furnaces and electric furnaces and is the raw material for steel products.

Eastern Steel has been exporting 40 percent of its steel products to other Southeast Asian countries, including Thailand and Indonesia, and now it plans to expand exports with the operation of the new blast furnace.

The company intends to install an additional blast furnace with an annual production capacity of 1.3 million tons within the next few years, further expanding its production capacity to 4 million tons.

The development raises bleak prospects for Korean steelmakers, including POSCO and Hyundai Steel Co., which have been exporting more than 20 percent of their steel products to Southeast Asia.

According to a report from the Organization for Economic Cooperation and Development (OECD), the steel production capacity of 10 Southeast Asian countries, including Vietnam, Indonesia, Malaysia, Thailand, the Philippines, and Singapore, is expected to increase by up to 35 percent in three years from 80.4 million tons in 2022 to 100.9 million~108.4 million tons in 2025.

The World Steel Association predicts that steel production capacity in Southeast Asia will increase by 91 million tons from this year to 2030.

The aggressive move by Southeast Asian countries is in contrast to China’s recent decision to reduce its steel production after being the epicenter of the global steel oversupply for the past two decades.

China’s steel production fell 1.7 percent year-on-year to 1.03 billion tons in 2021 and further decreased by 2.1 percent to 1.01 billion tons in 2022.

POSCO has also frozen its steel production capacity over the past ten years. The OECD said in its report that “the expansion of production capacity in Southeast Asia and the Middle East has led to significant global growth in steel production capacity, raising concerns about oversupply worldwide.”

“The only way for Korean steelmakers to survive is to continue to innovate in high-end materials such as automotive steel plates,” said Lee Joon-ho, a professor of Materials Science and Engineering at Korea University.

By Oh Soo-hyun, Seong Seung-hoon, Kim Hee-su, and Yoon Yeon-hae

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