Southeast Asia’s steel sector stands at a critical crossroads. Vietnam, Indonesia, and Malaysia have transformed from minor producers into major steelmaking forces over the past decade, with combined crude steel output surging from 14 million tonnes in 2015 to over 49 million tonnes in 2024. But this rapid expansion—driven overwhelmingly by carbon-intensive Blast Furnace-Basic Oxygen Furnace (BF-BOF) technology—has placed the region squarely in the crosshairs of the EU’s Carbon Border Adjustment Mechanism (CBAM).
In this paper by SGBC Member Ramboll, learn:
- Why ASEAN steel faces substantial CBAM exposure: Vietnam, Indonesia, and Malaysia now account for significant shares of EU steel imports, with weighted average emissions intensities ranging from 1.78 to 2.00 tCO₂ per tonne of crude steel—well above EU benchmarks.
- The investment trap: A staggering 68.7 million tonnes of new BF-BOF capacity is announced or under construction across the region, predominantly financed by Chinese state-linked capital. This represents a 25-30 year carbon lock-in precisely as EU carbon pricing enters full operation.
- The Malaysian anomaly: Export-to-production ratios exceeding 100% raise serious questions about transshipment and circumvention, placing Malaysia at the centre of the European Commission’s enforcement agenda.
- A counterintuitive age profile: While BF-BOF capacity is predominantly modern, the lower-carbon EAF sector is largely ageing—three-quarters of facilities over 20 years old—complicating assumptions about route-switching as a quick decarbonisation fix.
- Strategic implications for producers: Without robust Monitoring, Reporting and Verification (MRV) systems and domestic carbon pricing, ASEAN steelmakers face punitive default values that could render EU exports uncompetitive regardless of actual emissions performance.
Key Finding: Trade diversion is neither uniform nor costless. CBAM compliance may remain economically competitive relative to market diversion margins – but only if urgent investments in emissions verification and measurement infrastructure are made now.
This comprehensive analysis by Ramboll draws on World Steel Association data, Global Energy Monitor tracking, EU regulatory frameworks, and peer-reviewed research to provide an independent, analytical foundation for assessing ASEAN steel’s CBAM exposure and informing compliance, decarbonisation, and trade strategy decisions.
“Current investment patterns point to continued reliance on carbon-intensive production, raising the risk of long-term carbon lock-in across the region. As CBAM enters its definitive phase, this creates a growing tension between expansion and decarbonisation. Producers that cannot strategically adapt their technology mix and deploy robust MRV capabilities risk facing significantly higher costs and reduced access to high-value export markets,” said Prof. Dr. Volodymyr Shatokha, Senior Managing Consultant, Ramboll.
