Singapore is well-placed to tap into opportunities arising from higher ferrous trade owing to higher Asian steel demand and southeast Asia's rising steelmaking capacity, said Singapore's trade and industry minister Low Yen Ling.
"[Singapore's] strategic location at the crossroads of major sea routes makes us geographically ideal for distributing and trading ferrous materials to various parts of Asia," Low said at the Singapore International Ferrous Week 2024 this week. "Additionally, we have an efficient logistics sector that is well equipped to support the handling and transportation of ferrous materials."
Singapore has also established itself as a leading global commodity trading hub, Low added, citing the presence of prominent steelmakers and producers like China's Baowu and Europe's ArcelorMittal in Singapore.
Asia will continue to be a bright spot for the sector in the coming years as the region is also the largest consumer of finished steel products, accounting for about 70pc of global consumption, Low said. Southeast Asia is also poised to boost its steelmaking capacity by almost 25pc within the next three years, adding 20.5mn t/yr to its 80.4mn t/yr capacity in 2022, Low added. This will create new demand for iron ore imports, cementing southeast Asia's status as a key producer of exported steel.
But headwinds exist
The ferrous sector has enjoyed a boom in the past few years given higher demand owing to a post-Covid economic recovery, but the industry must still brace itself for several headwinds, Low said. Low highlighted three potential headwinds — weaker economic conditions, increased pressure from policies and regulations aimed at reducing carbon emissions, and protectionist measures from commodity-exporting nations.
A slowdown in China's construction sector could curb demand, Low noted, while fluctuations in energy prices for electricity and natural gas because of continuing geopolitical developments will inevitably create significant uncertainty for the industry.
Low also cited the EU's Cross Border Adjustment Mechanism (CBAM), which will result in higher carbon tariffs on steel imports into the EU when it is fully implemented in 2026, thus increasing costs for exporters and reducing their competitiveness.
This is in addition to top exporters of scrap metals like Japan and Malaysia imposing export barriers to prioritise their domestic markets. "As a result, transitioning to newer and lower-carbon steel production methods that rely on recycling scrap metals will become more costly due to the scarcity and higher costs of steel scrap materials," Low said.
The way forward
Singapore has established a strong carbon services and trading ecosystem to support ferrous industry participants in their transition towards decarbonisation, Low said. Over 120 carbon service firms are currently based in Singapore, Low added, marking the highest concentration of such providers in southeast Asia.
"We will reinforce our value proposition in trading and logistics while supporting companies in Singapore in reducing their carbon footprint," Low said.
