FERROUS SERIES: Singapore leads low-carbon steel adoption in SE Asia amid construction demand

Singapore is leading the way in low-carbon steel adoption in Southeast Asia, driven by early policy action, including the region's first carbon tax in 2019, and a growing emphasis on sustainability in construction and infrastructure.

This momentum has spurred the uptake of low-carbon steel, starting with the city-state's sole steelmaker, NatSteel, which has recently expanded its low-carbon product supply to New Zealand.

While the steelmaker occasionally imports billet and rebar for its low-carbon steel product, NatSteel primarily uses scrap in the electric arc furnace process and has earned several sustainability certifications.

Most recently, it earned a "Level A" certification from Australia's Global GreenTag for its long steel products, with just 0.5 mt of CO2 equivalent emissions per ton of steel made -- well below the global average of 1.92 mtCO2e, according to World Steel Association data.

In 2023, the apparent steel use in Singapore stood at 2.9 million mt, making up 0.23% of that in Asia, worldsteel data showed. The apparent steel use per capita in the city-state, meanwhile, was 491 kg in 2023, up 73 kg from a year earlier, surpassing its Asian neighbors such as Vietnam, Malaysia and Japan.

This growing demand has prompted distributors in Singapore to shift their procurement approach, especially amid increasing regulatory pressure for businesses to lower their emissions.

Steelaris, one of Singapore's key distributors, imports 3,000-5,000 mt of low-carbon steel each month from major producers such as ArcelorMittal, Nippon Steel and Hyundai Steel.

According to Managing Director Ang Tee Seng, more than 60% of its inventory comprises low-carbon steel -- defined as emitting less than 1 mt of CO2 per ton of steel.

"The key driver for Steelaris to shift to low-carbon procurement is regulatory pressure, firstly from the EU, which is driving sustainability efforts in Asia, and secondly, the overall big push for decarbonization in Singapore," he said.

As the EU's Carbon Border Adjustment Mechanism begins its definitive phase in 2026, Asian countries also face increased pressure to tighten environmental regulations in alignment with international standards. In Singapore, such domestic regulatory pressure comes in the form of a carbon tax, introduced by the Singapore government in 2019 as part of a transitional carbon pricing scheme.

The tax rose to S$25/mt in 2024 and is expected to increase to S$50-S$80/mt by 2030, supporting the country's net-zero goal by 2050.

Ang added that key policies, which include the upcoming Scope 3 emissions reporting requirements for all Singapore Exchange-listed companies by 2025 and the adoption of green building standards in major developments such as the new Changi Airport Terminal 5, are the key push factors for Steelaris to expand its low-carbon offerings.

Construction sector drives demand

As some countries scale back their sustainability goals amid heightened geopolitical tensions and an uncertain economic environment, Singapore is pressing forward as it continues to roll out government policies to incentivize market participants.

Within Singapore's construction sector, sustainability requirements are becoming increasingly common.

The Singapore government is actively rolling out measures to ensure new projects are low-carbon, and this has trickled down to developers, with some making it a requirement that at least 10%-20% of steel used must be low-carbon.

Government tenders are also prioritizing green-certified companies, especially after it developed some tools to ease carbon accounting, one of which is a web-based carbon calculator designed by Singapore's industrial developer JTC Corp. in 2023.

JTC said then that the calculator is designed to consider environmental product declarations and the latest low-carbon assessment methodologies, and is suited for the Singapore context.

Such requirements have sparked the interest of developers like Sydney-headquartered Lendlease, which actively integrates low-carbon materials across its residential and commercial developments in Asia, such as the Paya Lebar Green office building and Singtel Comcentre headquarters in Singapore.

In these projects, Lendlease used low-carbon steel, along with concrete and cement, to reduce embodied carbon by 30%-33%.

According to Darryl Stuckey, the company's head of environmental sustainability, Lendlease consumes nearly 1 million mt of low-carbon materials annually, with steel making up 20% of that volume.

Its procurement decisions would depend on project type, location and investor preferences.

Lendlease relies on third-party certification frameworks when evaluating carbon intensity, such as from Responsible Steel, in combination with its in-house carbon accounting team.

"Each project has some autonomy when it comes to carbon-related decisions," said Stuckey, "but the trend is clearly toward lower emissions across the board."

Some Singapore-based traders said that while there is increased demand, this demand is fluid and hard to quantify due to the emergence of different steel products and varying levels of carbon emissions.

High costs, limited data remain major challenges

As for challenges, market participants said high costs and limited historical pricing data make it difficult to evaluate fair value.

"The main issue is that customers are reluctant to pay a premium without regulatory pressure," Steelaris' Ang said, adding that distributors find it hard to pass down extra costs to customers.

According to Stuckey, Lendlease's switch to low-carbon materials is mostly out of sustainability responsibilities.

"To offset the extra cost of sourcing low-carbon materials, we have to redesign the buildings to make them more cost-efficient," he said. "Though it's hard to compete with other developers now, it helps us to build the internal capacity and prep Lendlease for changing regulations in the coming years."

The absence of universally accessible emissions data also makes it difficult to predict market trends or benchmark emissions between steel mills.

"Without consistent data, it's hard to make proper comparisons," he said, adding that companies also need to invest in credible partners for carbon accounting and certification.

But the problem is that few reliable players currently exist in this space, said Stuckey.

Notably, international carbon-accounting vendors such as Carbon Chain and HiQLCD are emerging to mitigate this challenge, generating high-fidelity emissions transparency and enabling businesses to accurately assess their carbon footprint and sustainability impact.

Premiums remain uneven

Low-carbon steel premiums remain inconsistent amid the lack of a widely accepted definition of low-carbon steel, further complicating the market, market participants said.

Prices vary significantly across regions and products, and depend on the emissions accounting standards of different steelmakers.

They added that premiums are more established for certain products like beams and hot-rolled coils, with premiums ranging between $50-$100/mt.

However, less common products such as steel plates and hollow sections can see far higher premiums of up to $300/mt.

Further, transactions involving low-carbon steel mostly take place under agreements on a project-by-project basis, which means that minimal spot trading takes place, which is the basis of price assessments for commercial-quality steel.

In Singapore, where there is strong government support for sustainability, some construction projects using low-carbon steel reported cost increases of up to 30%, causing developers to reconsider.

Stuckey noted that while premiums typically account for 2%-3% of the cost of conventional steel, these figures vary by region.

The Singapore market has shown a greater willingness to absorb higher costs due to the push from the government, while its Southeast Asian neighbors remain more conservative in their approach.

When it comes to green financing, steel remained a hard-to-abate sector for major banks in Singapore.

The latest financed emissions data from DBS Bank (2024), Oversea-Chinese Banking Corp. (2023) and United Overseas Bank (2023) showed that the lenders' reported emissions intensity attributed to loans they provide to the steel sector edged further away from their 2030 targets for the steel sector.

Other challenges

Insufficient supply availability also poses challenges to a wider adoption of low-carbon steel, as some steel products, such as plate, rely heavily on the blast furnace-basic oxygen furnace route and hardly meet lower emissions requirements. Currently, 90% of Steelaris' structural beams meet its low-carbon criteria, while less than 30% of its plate and hollow sections qualify.

But for steelmakers, investing in emission reduction technologies with limited low-carbon steel demand is challenging and even painful, especially when mills are struggling with their balance sheet under overcapacity.

Additionally, besides costs, buyers might have concerns about the quality and safety of new products, and so it is imperative for steelmakers to educate and convince end-users about low-carbon products.

With tepid steel demand globally, regulation may continue to be the most important driving force for decarbonization.