South African Automotive Sector at Risk Due to ArcelorMittal’s Facility Closure
NAACAM CEO Renai Moothilal has expressed grave concerns over the potential impact of ArcelorMittal South Africa’s (AMSA’s) long steel production closure on the country’s automotive sector.
The Importance of ArcelorMittal in the South African Automotive Industry
As the voice of the South African automotive component industry both domestically and internationally, NAACAM recognizes the significance of ArcelorMittal’s input. The company’s members supply original equipment manufacturers for assembly in South Africa, the export market, and the domestic and global aftermarket.
ArcelorMittal is a core supplier of specialty steel, providing high-grade materials critical for components in vehicle production lines in South Africa. This has greatly contributed to the competitiveness of the domestic sector, with every 1,000 tons of steel produced generating R9.2 million for the country’s GDP, according to InvestSA.
Ripple Effects Throughout the Automotive Value Chain
The closure of ArcelorMittal’s facility will have a cascading effect on the manufacturing value chain. The company is the sole local supplier of approximately 70 kilotons per annum of specialty long steel grades to the automotive sector.
This situation will force component suppliers to maintain significant buffer stock or import steel to keep operations running, potentially increasing costs by up to 25% due to longer lead times, logistics, and forex exposure. Moreover, South Africa’s automotive supply chains are intricately linked to local steel production, and the closure will introduce volatility.
The introduction of longer lead times and potential delays will impact the timely delivery of vehicles to both domestic and international markets, possibly affecting South Africa’s reputation as a reliable automotive hub.
As noted by Moothilal, the exit from the market by ArcelorMittal will create ripple effects throughout the automotive value chain and other downstream industries, impacting the sector’s competitiveness in the medium to long term.
Competing Against Global Giants
The absence of a local supplier of auto-grade long steel adds a significant competitive disadvantage to South Africa’s automotive sector, especially when competing against global giants. This does not only limit local industry growth but may also affect job creation and the overall economy.
This article was first published by Daily Investor and is reproduced with permission.
