Huge problem for car factories in South Africa

NAACAM CEO Renai Moothilal said the closure of ArcelorMittal South Africa’s (AMSA’s) long steel production could significantly impact the South African automotive sector.
NAACAM is recognised as the voice of the South African automotive component industry both domestically and internationally.
Its members include suppliers to original equipment manufacturers for assembly in South Africa, the export market, and the domestic and global aftermarket.
Moothilal said ArcelorMittal is a core supplier of speciality steel and has been central to automotive manufacturing.
It provides high-grade materials critical for components in vehicle production lines in South Africa.
“This has been a vital contributor to the competitiveness of the domestic sector,” Moothilal said in a press statement.
Its exit from the market will create ripple effects throughout the automotive value chain and other downstream industries.
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.
Metal fabrication, forming, and pressing is one of the largest subsectors within the automotive sector. This is not by coincidence.
Local autos-grade steel from ArcelorMittal South Africa has been a catalyst for the development of this subsector.
Beyond supply into domestic original equipment (OE) value chains, the ability to source local steel has become a competitive advantage for export supply of various metal components.
Electric vehicles assembled in the US have components forged in the Eastern Cape using speciality steel coming out of AMSA’s 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,” Moothilal said.
He added that the decision by ArcelorMittal will also impact the overall sector competitiveness in the medium to long term.
There are no other local suppliers of auto-grade long steel, which will force component suppliers to significant buffer stock or import steel to keep plants operational.
“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.”
He added that 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 South Africa’s reputation as a reliable automotive hub.
This article was first published by Daily Investor and is reproduced with permission.