Understanding AMSA's Decision
AMSA's long steel operations, encompassing facilities in Newcastle and Vereeniging, have been under financial strain due to several factors:​

Economic Challenges
The company reported a headline loss of 5.1 billion rand for the year ending December 31, 2024, a substantial increase from the 1.89 billion rand loss in 2023. This downturn is attributed to soft demand, escalating energy and logistics costs, and an influx of low-cost steel imports, particularly from China. ​

Operational Losses
The long steel division alone incurred operating losses amounting to 1.1 billion rand in 2024, doubling the losses from the previous year. ​Despite engaging in discussions with the South African government to explore potential interventions (like removing export taxes on scrap metal, imposing import duties, and reducing electricity and rail costs) no viable solutions were reached. As a result, AMSA has proceeded with its plan to wind down operations, with the shutdown process expected to be fully implemented by the second quarter of 2025. ​

What is the impact on the automative industry?
The closure of AMSA's long steel production facilities is anticipated to have profound effects on South Africa's automotive sector.

Supply Chain Disruptions
AMSA has been the sole domestic supplier of approximately 70 kilotons of specialty long steel annually to the automotive industry. This steel is integral to various components, from engine parts to structural elements. The cessation of local production necessitates reliance on imported steel, introducing challenges such as longer lead times and increased logistical costs, along with exposure to foreign exchange fluctuations. These factors could disrupt production schedules and increase operational expenses for automakers. ​

Economic Ramifications
The automotive sector is an important contributor to South Africa's GDP, accounting for about 5.3%. The potential loss of local steel production could jeopardize approximately 16,000 jobs within the automotive components industry, with broader estimates suggesting up to 25,000 jobs at risk when considering indirect effects. ​

Competitiveness Concerns
Increased reliance on imported steel may lead to higher costs, potentially diminishing the competitiveness of South African automakers in the global market. This scenario could result in reduced export volumes and challenges in maintaining market share. ​

Industry Response and Adaptation Strategies
Major car manufacturers have urged AMSA to postpone the plant closures to allow time for the industry to adapt and seek alternative steel sources. This request underscores the urgency and gravity of the situation facing carmakers. ​Automotive companies are actively seeking new domestic and international steel suppliers to reduce dependency on a single source. While this approach may mitigate some risks, it also introduces challenges related to quality assurance and supply chain reliability.​ There are calls for the South African government to implement supportive policies, such as adjusting import tariffs and providing incentives for local steel production, to bolster the automotive sector during this transition. Proactive government involvement is deemed vital to sustain the industry's competitiveness. ​

Looking Ahead
The potential closure of AMSA's long steel production facilities underscores the vulnerabilities within South Africa's industrial sector, especially the automotive sector. Addressing these challenges might require a collaborative approach.

Diversifying Supply Chains
Automakers may need to explore alternative local suppliers or invest in developing new supply chains to reduce dependency on a single source.​

Innovation and Adaptation
Investing in research and development to identify alternative materials or advanced manufacturing techniques could boost our resilience and competitiveness.​ The situation presents both challenges and opportunities for South Africa's industrial sectors. Proactive measures and strategic collaborations will be essential to navigate the find the road ahead and secure sustainable growth.