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The Whyalla steelworks blast furnace has been damaged during repair efforts, pushing back the expected production restart date.
The steelworks has been offline for more than seven weeks, and many workers have had their hours reduced, after the furnace cooled too much and molten metal inside hardened following a planned routine maintenance.
A spokesperson for the steelworks said the furnace shell was damaged during the recovery work, but it is "repairable" and "that work is now underway."
"(We are) working hard to bring the blast furnace back up to its usual operation as quickly as possible, this event may delay the anticipated restart date," the spokesperson said.
The ABC understands the furnace shell, or 'vessel', suffered a crack on Tuesday during an attempt to reconnect to the main tap hole as the team moved to reinstate an eighth wind tuyere – which are fans that send hot air into the furnace.
A team of welders from Adelaide is understood to be heading to Whyalla to try to mend the crack.
The steelworks is owned by Liberty Primary Steel, a company that's part of British businessman Sanjeev Gupta's global metals group, GFG Alliance.
South Australia's Energy and Mining Minister Tom Koutsantonis said the development raised "grave concerns".
"I'll be sending a team up this week to inspect it with independent experts the government will be engaging to make sure we get the answers that we want," Mr Koutsantonis said.
"This is a very important part of kit, we're not ready to transition to an electric arc furnace, this blast furnace needs to survive," Mr Koutsantonis said.
The state government has promised $50 million to GFG Alliance to help pay for the $500 million electric arc furnace the company has ordered from Italian manufacturer, Danieli Group, that will help it make green steel at Whyalla.
The federal government has also committed $63 million to the project.
GFG Alliance has confirmed it is using existing inventory and importing billet steel – the raw product cast from a furnace that is then processed into finished goods – to meet the orders of the customers of the steelworks.
Since April 22, many of the around 1,100 workers have been shifted onto a temporary day roster and a cut of around four hours a day, resulting in a pay cut of between 20 to 30 per cent for those staff.
Shane Karger, organiser of the Australian Workers' Union's Whyalla and Eyre Peninsula branch, told ABC Radio Regional Drive workers are being encouraged to take holidays while the furnace was offline.
"What's happened here over the last eight weeks is just really bad luck and bad timing," Mr Karger said.
"So to burn the shell again, it's not something that's never happened before but for it to happen now is just really bad timing.
"I've heard reports that it could be up to 10 to 14 days to repair it. It is repairable, like I said they've done it before but it's hard to speculate."
Mr Krager said morale between staff "is not the best" at the moment.
"There's no denying it's been tough here for a while," he said.
"But to have the furnace go down on a scheduled maintenance, the company has decided to put it down for two days and we're now six weeks later, it's just another kick in the guts to the workers that have striven to move heaven and earth to keep the place running."
On Friday, before the latest setback, the Whyalla steelworks' managing director Tony Swiericzuk told ABC News the plan was to have the furnace operating fully again in "weeks".
The 59-year-old furnace was last re-lined in 2004, a process that is important to maintaining a blast furnace's longevity.
Mr Swiericzuk said there are no plans to re-line the Whyalla furnace again, "that wouldn't align with our green steel vision and our carbon neutral [by 20]30".
"The furnace condition is surprisingly good, we've had two external reports done in the time that I've been there and both reports are quite positive in the furnace's condition," he said.
Opposition leader David Speirs said the shutdown is putting "thousands" of jobs at risk.
"Not only jobs at the blast furnace, but associated jobs around that Upper Spencer Gulf community," he said.