Whyalla Mayor Clare McLaughlin has called for calm as British billionaire Sanjeev Gupta faces a legal challenge aimed at winding up the operations of OneSteel Manufacturing.
It comes after the collapse of a Greensill Capital, a significant financial backer of Mr Gupta's GFG Alliance empire, which has left the magnate rushing to find a way to refinance his business.
Ms McLaughlin said GFG Alliance had reassured the Whyalla City Council that it would meet any legal challenge head-on.
"We have been reassured that they will vigorously defend any legal proceedings; that they continue to have sufficient funds for their current operations - which are performing very strongly - and that they are progressing well in securing alternative funding," she said.
"These are all encouraging signs so we implore the community to remain positive as this process plays out, and to not jump to conclusions based on speculation.
"Council was recently briefed by GFG on its local operations and it was extremely encouraging to hear about their profitability; the record rates of production and strong demand for their product as well as the positive attitude of their employees despite recent external speculation.
"This is all very positive news that should give the community confidence in GFG's future in Whyalla."
Member for Giles and former steelworks employee Eddie Hughes said the uncertainty around the steelworks' future would reverberate around the entire community.
"Our community had to weather the Arrium administration five years ago. This is another thing we don't need," he said.
"A temporary or permanent closure of the steelworks would have a massive impact on Whyalla."
Federal Grey MP Rowan Ramsey noted that GFG had only recently announced their Australian businesses were performing well and generating a positive cash flow.
Mr Ramsey said it was unclear how Citibank intended to pursue its winding-up claim, given GFG had no financial dealings with the bank.
"It seems Credit Suisse made capital available to Greensill, the financier currently in administration who then made finance available to GFG," he said.
"It is way too early to panic ... we have an owner, who says he will be able to refinance and that his Australian businesses are profitable, being pursued by a bank which he says he has no dealings with.
"We need people to stay calm as we work our way through the issues. I can assure the residents and businesses of Whyalla we are watching the space closely."