The loss of long steel production at ArcelorMittal SA’s (Amsa) Newcastle plant could cost up to 16,000 jobs in the local automotive components industry, slash vehicle exports and wreck plans to localise the industry.
That was the stark warning on Thursday from Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers (Naacam).
Exports account for two-thirds of the local motor industry’s production.
Describing Amsa’s plan as “alarming”, he said the company was the sole domestic supplier of about 70,000 tonnes of speciality long steel grades supplied annually to the SA motor industry. Some of that was used to make unique components for export customers, including electric vehicle (EV) manufacturers in the US. Local companies exported R70bn of components in 2024.
Moothilal warned that if the Newcastle closure went ahead as planned, up to 3,000 jobs could be lost immediately at components companies that are direct customers of the plant.
Another 13,000 components jobs would be at risk in 2025 as vehicle and components companies sought to counter increased costs and potential production disruptions. Longer term, up to 100,000 jobs could be affected across the economy.
At present, the motor industry provides about 116,000 direct jobs at vehicle and components companies, and supports hundreds of thousands more in other industries.
Moothilal said the availability of Amsa auto-grade steel had been a “catalyst” for the growth of the local components sector, providing not just the product but also assured supply and protection from exchange rates.
While it would be possible to import the necessary steel from abroad, neither of the last two factors was guaranteed. Long supply chains and delivery lead times were unhelpful in an industry reliant on just-in-time supply.
Moothilal said: “With no other local suppliers of auto-grade long steel immediately available at [vehicle manufacturers’] certified standards and volume, component suppliers will either need significant buffer stock or must import steel to keep plants operational this year. This will have a cascading effect on the manufacturing value chain. Steel importation can increase costs by up to 25% due to longer lead times, logistics and forex exposure.”
The absence of SA steel would also reduce local content levels in SA-made vehicles, leading to the loss of incentives paid to vehicle and components manufacturers under the government’s 2021-35 Automotive Production Development Programme (APDP).
Worse, said Moothilal, it could shrink local content below the levels required for SA vehicles to meet international rules-of-origin regulations allowing them to be exported duty-free into some markets.
About two-thirds of SA-made vehicles are exported. In 2024, the total was 308,830. Export values for last year have yet to be announced but in 2023 they were R203.9bn.
The government is trying to persuade motor companies to invest in the production of EVs and reduce their reliance on petrol and diesel vehicles, which will be outlawed in many export markets in the next decade.
Though Amsa has hinted previously that its long steel operations were unsustainable, Moothilal said the announcement that it will cease production at Newcastle at the end of January “risks supply chain disruptions and delocalisation in the short term and overall sector competitiveness in the medium to long term”.
He said that typically it took up to a year for new steel suppliers, local or foreign, to meet customers’ quality and homologation standards.
Motor companies, faced with an immediate threat to the availability of some components, could source them from overseas instead.
That would undermine the APDP’s long-term goal of increasing motor industry localisation. The motor industry accounts for about 4% of SA’s GDP, more than 25% of manufacturing output and 15% of exports.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.