Decarbonising Steel Industry in Southeast Asia – balancing short-term wins and long-term strategies

In the recently published whitepaper “Decarbonisation imperatives in the steel sector - A roadmap for immediate action”, Ramboll experts explored the strategies for the short-term to contribute to a more decarbonised steel sector.

These short-term strategies are a crucial jigsaw part to kick-start the decarbonisation of the steel industry in Southeast Asia.

The ASEAN region currently produces around 80 million tons of crude steel annually, and this figure is projected to increase to 184.5 million tons by 2029/2030¹ . A majority of this additional capacity - 83.6 million tons - is expected to originate from the coal-based Blast Furnace-Basic Oxygen Furnace (BF-BOF) route, which is notably more emission-intensive process compared to other production routes, such as the Electric Arc Furnace steelmaking based on scrap (scrap-EAF) or Direct Reduction Iron (DRI-EAF).

Nonetheless, the BF-BOF route offers cost competitiveness due to the cheap, abundant coal supply in ASEAN, in addition to its robust process that does not require high-quality iron ores as feedstock. This route can also produce high-quality steel products essential for the automobile, electronics, and aerospace industries. Therefore, in the next 20-30 years, BF-BOF is projected to remain the predominant production route globally and regionally.

Conversion of BF-BOF to the DRI-EAF route is widely accepted as a long-term solution to decarbonise steel manufacturing, especially with hydrogen-based DRI. Decarbonization of the EAF steelmaking, whether based on scrap or DRI, largely depends on availability of renewable energy sources. Major steel-producing countries such as Malaysia, Indonesia, and Vietnam rely heavily on coal, and the limitations of natural resources in these countries—such as onshore/offshore wind or non-farmland for solar—mean that grid decarbonisation will be a long-term transformation. Furthermore, the availability of scrap or high-quality iron ore will fundamentally limit the EAF capacity in the ASEAN region. Hydrogen infrastructure and supply chain also appear to be a far-fetched goal rather than a short/mid-term enabler for low-carbon steel. Therefore, decarbonising ASEAN steel production predominantly means addressing the emissions from blast furnaces in the region.

So, what options do we have in the short-term for Southeast Asia?

Many steelworks in the ASEAN region were built recently and already utilize the most impactful best available energy-efficient technologies. However, as mentioned in the white paper, one of the remaining “low-hanging fruits” includes energy efficiency measures such as waste heat recovery (WHR) and updated data acquisition systems that enable advanced controls. More specifically for BF-BOF, waste heat recovery can bring substantial energy savings. A recent study by Ramboll, closely examining the process design and operation of a recently built integrated steel mill, found that WHR/heat optimisation opportunities exist in various plant processes, such as sintering strand, blast furnace hot stoves, and rolling mills. Currently, these hot exhaust streams are mostly discharged via the stack without heat recovery. Utilising waste heat for energy production and recuperating process heat for reheating purposes can contribute to around 2% of overall direct CO2 emission reduction.

Endless casting and rolling, as another immediate measure for ensuring material and energy efficiency, is suitable for greenfield projects and has been implemented in certain steel mills across ASEAN.

Waste and by-product utilization is another critical issue. The use of steel slags can generate additional revenue streams, and although it does not offer significant emission reductions for the steelmaking process itself, slag utilization is crucial in the construction sector for reducing the use of virgin materials, increasing the overall energy and resource efficiency in economy. In the EU², all BF slag is utilized, with 83.9% used in cement and concrete production and 15.6% in road paving. However, only 73% of steelmaking slag (BOF and EAF) is utilized, while 11% goes to interim and 16% to final deposit. Moreover, steel slag is mostly utilized as a road paving material with only minor amount used for cement and concrete. In comparison, China has a steel slag utilization rate of only 29.5%³ . In Malaysia⁴, all steel slag is landfilled. in Vietnam⁵ and Indonesia⁶, it is categorised as a hazardous waste and not utilized. Significant changes in slag utilization accompanying the steel sector’s transition, could be explored holistically with its potential effects on other industrial sectors.

Alternative fuels such as biomass can partially replace coke breeze in the sintering process. Tuyere injection of alternative fuels such as natural gas or other hydrocarbon fuels in the blast furnace can reduce coke consumption, thereby bringing additional emission reduction benefits. Hydrogen tuyere injection has been trialled in various plants globally, and the technology has long-term potential to reduce dependency on coke. However, injection of alternative fuels will not fully replace coke which, in addition to its roles as a reductant and energy carrier, serves as a structural material that ensures gas permeability in the shaft and flowability of molten slag and iron in the hearth of the blast furnace.

To significantly reduce direct emissions on-site for coal-based integrated steel mills without early retirement or decommissioning, Carbon Capture, Utilisation and Storage (CCUS) is the primary option. Blast furnace hot stoves flue gas contains over 20% CO2 by volume, offering an excellent capture opportunity. Other major emitters include power plants that typically burn process gases for energy production. By targeting hot stoves and power plant flue gases with CCS, one can potentially abate around 70% of direct emissions on-site. Introducing carbon capture to steel plants faces constraints not only due to high energy requirements but also due to the lack of CO2 transport and storage infrastructure. Emerging technologies offer partially or fully electrified capture processes that enable advanced process and energy integration potential to improve overall plant-wise energy efficiency, lowering energy penalties. The CO2 downstream handling and storage infrastructure will require significant infrastructure development, which is in a similarly nascent stage as the hydrogen economy.

In summary, ASEAN faces tremendous challenges to decarbonise its BF-BOF dominated iron and steelmaking industry. Measures such as energy efficiency, continuous casting and rolling, and certain hydrocarbon replacements for coke offer immediate but minor reduction potential without major retrofitting efforts. Mid to long-term measures such as capacity switch to EAF (scrap or H2-DRI), fuel switch, and CCUS all require significant investment, supply chain, and infrastructure development besides technology development itself. Regulatory pushes such as the Carbon Border Adjustment Mechanism (CBAM) and regional ETS/carbon tax systems will soon incentivise the early movers in the market. However, subsidies and consumer market willingness to pay will be essential drivers to enable a low-carbon steel ecosystem.

^{[1] SEAISI, Message from the Secretary General: Tackling the Perennial Overcapacity Issue in the ASEAN Steel Industry, 2024, https://www.seaisi.org/}

^{[2] EUROSLAG, 2022, https://www.euroslag.com/products/statistics/statistics-2022}

^{[3] Guo et al, Steel slag in China: Treatment, recycling, and management, Waste Management, 2018, https://doi.org/10.1016/j.wasman.2018.04.045}

^{[4] Bankole et al, Assessment of hexavalent chromium release in Malaysian electric arc furnace steel slag for fertilizer usage, IOP Conf. Ser.: Earth Environ. Sci, 2014, https://iopscience.iop.org/article/10.1088/1755-1315/19/1/012004}

^{[5] Le et al, Assessment of natural radioactivity of Vietnamese steel slag for using as landfill material, Journal of Material Cycles and Waste Management, 2023, https://doi.org/10.1007/s10163-023-01797-3}

^{[6] Wardani, et al, Characterization of steel slag and its effect on rice production in Latosol and acid sulfate soil, IOP Conf. Ser.: Earth Environ. Sci, 2021, https://doi.org/10.1088/1755-1315/694/1/012056}