As a core supplier of speciality steel, AMSA has been central to automotive manufacturing, providing high-grade materials critical for components of vehicle production lines.

Its exit from the market will create ripple effects throughout the automotive value chain and other downstream industries.

So says Renai Moothilal, the Executive Director of the National Association of Automotive Component and Allied Manufacturers (NAACAM).

The economic value of local steel production is significant. According to InvestSA, every 1 000 tons of steel produced in South Africa adds R9.2 million to GDP. This production supports six jobs—three directly and three indirectly—and drives domestic procurement, including at SMME level.

Within the automotive sector, metal fabrication, forming and pressing are of the largest subsectors. This is not by coincidence. Local auto-grade steel from AMSA has been a catalyst for the development of this subsector.

Electric vehicles assembled in the US have components forged in the Eastern Cape using speciality steel coming out of the Newcastle blast furnace.

AMSA is the sole domestic supplier of roughly 70 kilotons per annum of speciality long steel grades to the automotive sector. AMSA’s short-notice announcement that the plant will close 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.

With no other local suppliers of auto-grade long steel immediately available at OEM-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 imports can increase costs by up to 25% owing to longer lead times, logistics and forex exposure. Added to this is the loss of local content derived from local steel, reducing APDP incentives to vehicle and component manufacturers and placing SA at risk of failing to meet export rules of origin (RoO) requirements.

The automotive industry is a significant contributor to South Africa’s GDP and export revenues, with vehicles and components accounting for approximately 15% of total exports. Any decline in the industry's cost competitiveness would directly affect its ability to play in global markets.

In the absence of sufficient buffer time and raw material, a likely outcome of this in SA for vehicle plants that are already in mid-cycle production: to prevent their own assembly line stops, OEMs could, via imports, resource entire finished components, as opposed to raw material, to pre-existing, certified global component suppliers of sister plants. Such an outcome would reduce the SA component sector’s contribution to the economy and impact jobs before the year is out.

This despite the SA Automotive Masterplan having increased localisation as its underpinning tenet. South Africa’s automotive supply chains are intricately linked to local steel production. The closure of AMSA Newcastle will introduce volatility, with manufacturers facing longer lead times and potential delays in production schedules. This disruption will affect the timely delivery of vehicles to both domestic and international markets, possibly impacting the reputation of South Africa as a reliable automotive hub.

In 2024, the automotive manufacturing sector directly employed over 116 500 workers and supported thousands more indirectly. The loss of AMSA longs would lead to significant job cuts, severely impacting the industry and the livelihoods it sustains. Other than the estimated 3 500 direct jobs lost in Newcastle, NAACAM research has estimated this decision could mean the further immediate retrenchment of up to 3 000 auto component sector jobs in components directly affected.

This is alarming given South Africa’s unemployment rate stands at a staggering 32.1%. Assume any future vehicle plant production line stoppages owing to the unavailability of steel, reduced production volumes and rising operational costs associated with increased material imports could force automakers and suppliers to further reduce their workforce to maintain sustainability. Here, a further 13 000 jobs are seen to be at risk in 2025. It’s conceivable that coupled with other competitiveness concerns around logistics, OEM volume volatility etc, the plus 100 000 jobs become untenable over time.

If indeed, SA is committed to a path of industrialisation, state intervention is required to find measures that ensure the vehicle value chain has access to local speciality steel. That includes getting an AMSA commitment for required production out of the Newcastle blast furnace for at least a full year buffer supply, buying time to transition local mini-mills into certified suppliers of auto grade steels, or better yet, explore sustainable ways to keep Newcastle open.

(Main photo for illustration: ArcelorMittalSA).