Upset automotive industry
This has upset the automotive industry, including component manufacturers, which uses locally produced steel as a means to earn benefits under the department of trade and industry's motor industry development program.
Poor quality of steel products
Mr Roger Pitot executive director of the National Association of Automotive Component and Allied Manufacturers said that there has been concern for some time about the price, shortages and poor quality of a number of steel products.
Mr Pitot said that AMSA advised customers that it was halting the production of special electro galvanised steel locally and would be importing it from Europe.
Stop production
The association also believed that AMSA was planning to stop production of several higher grades of flat and long-steel products. He added that "This will affect our members as they need to use locally produced steel to earn higher incentives under the motor industry development program."
It was also likely to have an impact on members under the automotive production development program, which will replace the current program next year. Although companies could opt to import steel at cheaper prices and some had already begun doing so, it affected local content requirements across the supply chain.
The shutdown
Mr Pitot said at least one NAACAM member had managed to import steel at 15% less than what it would have paid for the product from AMSA. The problems had been in evidence for some time, he said, particularly after AMSA was forced to shut down its Newcastle plant in November 2011.
He said that "We believe it was poor maintenance and an unwillingness to invest in local infrastructure that led to the shutdown."
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Mr Pitot said that the declining quality and output of electro galvanised steel, used for things such as the bodies of vehicles, was as a result of AMSA's decision to install a second-hand plant when it set up the facility.
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According to the department of trade and industry, these supply issues have become severe enough for some companies to approach the department to seek relief. The motor industry development program provides a benefit in the form of duty rebate certificates, based on exported local content.
Business models were negatively affected
Mr Mkhululi Mlota, automotive chief director at the department, said that many companies had factored the benefits under the program into their business models and were being negatively affected because they had to use imported steel in their products.
This week, trade and industry minister Mr Rob Davies reiterated the state's determination to realize a more competitive local price for steel and increased competition in the sector. He said that "We want to see more players in the sector."
