Whyalla locals brace for further pain

Homeowners in Whyalla are selling up amid concerns job losses at the local steelworks could drive higher crime and drug abuse, a Senate committee hearing has heard.

The Australian Workers' Union says more than 600 homes have already been put on the market as troubled steelmaker Arrium considers mothballing its South Australian operations.

"Nobody wants to buy into a town that hasn't got a future," a union spokesman told the hearing in Whyalla on Tuesday.

"There's people that have just invested in housing, young families that have had a job at the steelworks or the mine, that are contemplating selling it or giving it back to the bank."

The value of the local property market had fallen from $2.7 billion to about $1.5 billion in recent years, Whyalla acting mayor Tom Antonio told the committee.

Earlier, hundreds of steelworkers and their families marched the streets of Whyalla, chanting "save our steel".

Addressing the rally, independent senator Nick Xenophon said the NSW state government should be ashamed of themselves for importing Spanish steel rather than using local materials.

"Whyalla is at five minutes to midnight," he said.

"This is about a battle for Australian manufacturing. If Whyalla doesn't make steel then this country's not going to be making much at all in years to come."

There are fears jobs at Arrium's mining operations in Whyalla could be under immediate threat after some workers voted not to take a pay cut to help the embattled company.

The steelmaker, which is grappling with growing debt and low iron ore prices, has said it needs to find $60 million in savings to continue operating the Whyalla steelworks.

Arrium is expected to update the market on Wednesday.

The federal government last month announced it would bring forward a 600km upgrade of rail lines between Adelaide and Tarcoola to assist the steel producer.

But on Monday the company's banks knocked back a proposed bailout involving a private equity group.

SA Treasurer Tom Koutsantonis said he still hoped a recapitalisation deal could be reached and confirmed the government would offer some funding provided Arrium ensured the continued operation of the steelworks.