Article
June 3, 2026
ASEAN Steel at a Crossroads: Carbon, Trade and the Reality of CBAM
ASEAN’s steel industry faces a pivotal challenge: balancing rapid growth with decarbonisation as CBAM reshapes trade, costs and competitiveness.
Contact our expert
Volodymyr Shatokha
Senior Managing Consultant
Southeast Asia’s steel sector is entering a defining moment. Over the past decade, Vietnam, Indonesia and Malaysia have transformed themselves into major steel producers, driven by rapid urbanisation, industrialisation and infrastructure growth. Yet beneath this success story lies a growing strategic tension: how to reconcile expansion with an increasingly carbon-constrained global market.
With the European Union’s Carbon Border Adjustment Mechanism (CBAM) now entering its full implementation phase in 2026, the implications for ASEAN steelmakers are no longer theoretical. They are immediate, material - and potentially disruptive.
The region’s growth has been powered predominantly by blast furnace–basic oxygen furnace (BF-BOF) technology, which remains the most carbon-intensive route for steel production. As a result, ASEAN producers face structurally higher emissions compared to low-carbon benchmarks, translating directly into additional costs when exporting to the EU.
At the same time, the investment pipeline suggests that this exposure is set to increase rather than decline. A significant share of new capacity under development across ASEAN continues to follow the same carbon-intensive pathway, raising the risk of long-term “carbon lock-in” for assets expected to operate well into mid-century.
But the challenge is not only technological, it is also structural. Trade patterns across the region reveal complex supply chains, export dependencies, and, in some cases, questions around origin and processing that intersect directly with CBAM compliance requirements. For exporters, the issue is no longer just cost competitiveness, it is the ability to credibly measure, verify and disclose emissions under an increasingly stringent regulatory framework.
Crucially, the absence of robust monitoring, reporting and verification (MRV) systems - and limited domestic carbon pricing - means many producers risk defaulting to conservative emissions assumptions, which can significantly inflate their CBAM liabilities.
The result is a sector caught between growth ambitions and decarbonisation imperatives. For some, compliance may remain viable with the right investments in data, efficiency and technology. For others, the shift may reshape trade flows entirely, triggering diversion rather than decarbonisation.
So what does this mean for ASEAN’s steel future, and for global climate goals?
Our latest paper provides a detailed, data-driven analysis of carbon intensity, trade exposure and investment trajectories across the region, offering critical insights for policymakers, investors and industry leaders navigating this rapidly evolving landscape.
Read the full paper, which was first published by Singapore Green Building Council, to explore the risks, opportunities and strategic choices ahead.
The ASEAN Steel Sector: Carbon Intensity, Trade Patterns, and CBAM Exposure - Singapore Green Building Council.
Contact our expert
Senior Managing Consultant