Good news for 7 car factories and 100,000 workers in South Africa

ArcelorMittal South Africa (AMSA) has committed to ensuring a minimum 12-month supply of speciality long steel products after it shuts down its Newcastle and Vereeniging blast furnaces.

AMSA is the only supplier of this material to the country’s seven original equipment manufacturers (OEMs) – comprising BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and VW.

The company grabbed headlines at the start of 2025 when it announced it would be closing its Newcastle and Vereeniging blast furnaces due to an unfriendly operating environment that rendered it unable to make these plants profitable.

The revelation raised several concerns, chief of which is that it could lead to production delays as automakers scramble to find alternative suppliers for the vital material.

Likewise, the National Association of Automotive Component and Allied Manufacturers (Naacam) highlighted that it could lead to the immediate dismissal of around 3,000 workers in the automotive industry, with the potential of 13,000 people losing their jobs within a year after the AMSA closures.

Taking into account the rail, construction, and defence industries which also rely on AMSA, Naacam approximates that as many as 100,000 employees are at risk.

The OEMs and South African government thus pleaded with AMSA to cancel the shutdowns or, at the very least, delay them by 12 months to allow them enough time to find new suppliers.

While it seems unlikely that AMSA would cancel its plans, it did say in its latest earnings report that it would ensure that there’s a sufficient stockpile of long steel for a 12-month period, said Renai Moothilal, Naacam Executive Director.

This should, in theory, allow the OEMs to continue vehicle assembly operations and retain jobs while searching for and approving new long steel purveyors.

AMSA’s Newcastle blast furnace

The long-term solution

AMSA’s announcement has been welcomed by the automotive industry but remains a short-term band-aid to a long-term problem.

At present, the OEMs will likely have to resort to importing the steel materials from overseas markets which could raise production costs by as much as 25%, an expense that will likely be shouldered by the end consumer one way or another.

Naacam is thus calling for industry stakeholders to band together and find a long-term solution to their supplier woes.

“We’d like to see both [AMSA] and the stakeholders involved, including government and ourselves as industry representatives, find a more medium-term solution,” said Moothilal in a Smart Money interview.

“Let’s find a way of ensuring that those particular special grades of steel continue to be produced somehow in South Africa.”

Moothilal indicated that the solution will require policy support from government. The global steel market mirrors that of South Africa as there is an oversupply of products which means locally made goods compete with imports in many overseas economies.

AMSA has complained of similar issues in the domestic market, partly facilitated by government policies that keep the price of steel scrap — used as a raw material by its rivals — artificially low.

It has also bemoaned the nation’s unstable electricity grid, poor infrastructure, and unreliable logistics as key reasons for its impending departure.

“There are valid reasons as to why [AMSA] finds themselves in the situation, so I do think there could be some policy support that comes on board,” said Moothilal.

“Changes around export tax and scrap restrictions could assist AMSA.”

Ford Ranger plant, Silverton

The cost to the economy could be dire should plans not be put in place to ensure the continued supply of long steel to South African industries.

For instance, the South African Automotive Masterplan seeks to have localisation rates in locally made vehicles reach 60% by 2035. Localisation refers to the number of components within a car sourced from domestic suppliers.

Naacam calculates that just a 5% improvement in localisation contributes an astounding R30 billion to the national fiscus.

“Of course, that is made up of a range of components, but it can give you a sense of, as you start losing local content, what the rand-value loss behind that is,” said Moothilal.

Additionally, auto manufacturing is responsible for a 30% portion of the total manufactured products in the country and contributes approximately 5% to the GDP per year.

“I do think from a manufacturing economy perspective, we cannot afford to do without autos manufacturing, and the governnment has made a decision that it wants to promote automotive manufacturing over the long term for, what I believe, are the right reasons,” said Moothilal.

“So you need to step up and go the full hog, and I think as stakeholders, we need to be clear that you can’t have that vision and at the same time be losing key raw materials.”

Moothilal also referenced countries including China, India, and Japan which have the highest concentration of blast furnaces in the world.

If you do a basic analysis of these economies, you’ll find that their vehicles tend to dominate export markets.

“I think it’s definitely key that we maintain the competitiveness of domestic production and we maintain the raw material supply that has made us, to some extent, competitive over time,” Moothilal concluded.