Huge Investments in New Steel Projects to Boost Steel Overcapacity

SEATTLE (Scrap Monster): The South East Asia Iron and Steel Institute (SEAISI) has warned that heavy investments by regional steel producers in new steel projects are likely to lead to potential overcapacity situation.

According to the association, there has been a significant spurt in investments in BOF integrated steel mills in the region, which are mainly funded by Chinese steelmakers and bankers. The upcoming production capacities in the ASEAN region are likely to worsen the region’s overcapacity woes.

The Chinese steel firms have committed investment of up to 50 million metric tons of production capacity across several ASEAN region countries. The investments by companies in other countries in partnership with local firms will add up to another 100 million metric tons of steel production. This will boost the total overcapacity in the region to more than 60 million metric tons. It will take nearly 20 years for the demand to match this capacity level, SEAISI noted.

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The overcapacity situation will lead to severe competition within the industry. As a result, local steel producers could face severe financial losses, thereby posing threat to the sustainability of steel industry in the region.