The federal government has promised crisis talks with BlueScope Steel and the NSW government, as thousands of jobs linked to the company's Port Kembla operations hang in the balance.
The troubled steelmaker returned to profitability but says falling demand from China means it will be cheaper to source steel substrate from overseas unless it reduces costs.
The company has flagged plans to cut 500 jobs as it works to find the $200 million in annual savings it says it needs to maintain production in Australia.
The mothballing or closure of BlueScope's steelworks south of Sydney - would trigger the loss of about 5000 Illawarra jobs.
Federal Industry Minister Ian Macfarlane on Tuesday called a meeting in early September to hash out a long-term economic strategy for the region.
"The Australian government understands the concerns of the Illawarra and wider community about the future of steel production at Port Kembla and its impact on jobs, and recognises that the steel industry is an important contributor to both the Illawarra and the national economy," Mr Macfarlane said in a statement.
"While BlueScope Steel has outlined the serious challenges it is facing to maintain international competitiveness, these are challenges that all Australian businesses must face when trading in international markets."
The NSW government has been in talks with the troubled steelmaker and is expected to be pressed for help reducing BlueScope's payroll tax burden and regulatory compliance costs.
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