A mass meeting of Bluescope Steel workers in Wollongong on Thursday endorsed the mediated recommendation of the FairWork Commission designed to keep the Port Kembla steelworks open. The package includes the loss of 500 jobs, a pay freeze and changes to overtime payments.

A ballot will now be conducted through the Australian Electoral Commission to seek formal approval for the new proposal.

The new report by BIS Shrapnel released on Tuesday shows the introduction of local procurement policies for steel in NSW could significantly improve the profitability and viability of the local steel industry, particularly in the Illawarra.

Australian steel makers Bluescope and Arrium are under pressure from rising imports, including cheap steel dumped by China.

BIS Shrapnel recommends a policy for 90 per cent local steel content, which it estimates would add an average of $61 million to $80 million a year in extra costs to the public sector, which would, "in all probability, keep both local steel makers in production".

"This contrasts to the business-as-usual scenario, where further loss of market share (and no local content policy) leads to a cumulative reduction in real GDP of $381 million over the next five years," the report says.

Under a complete shutdown, the national economy would lose production of 5 million tonnes of steel and up to 10,000 jobs.

"This would subtract $10 billion per annum from real GDP and significantly reduce taxation revenue to state and federal governments. In addition, the severe regional impacts in Wollongong/IIlawarra and Whyalla would probably necessitate substantial extra government expenditure on large bailout packages for these affected regions," the report says.

"The bottom line is that the small extra cost to government from a local procurement policy is far less than the cost of inaction, which could ultimately lead to severe costs to jobs and the economy if one or both steel makers shut down."

The Australian Workers Union has used the findings to urge the NSW government to adopt the local procurement policy embraced by the Labor government in Victoria.

BIS Shrapnel estimates the amount of steel needed for government projects is forecast to rise from 1.3 million tonnes in 2014-15 to 1.7 million tonnes in 2018-19.

The report says the Victorian Industry Participation Policy, which requires the government to consider competitive local suppliers when awarding contracts valued at $1 million or more in regional Victoria and $3 million or more in Melbourne and the rest of the state, has been "very successful in encouraging the use of domestic suppliers".

"Since its inception in 2001, the VIPP has led to an estimated $7 billion of import replacement," the report says.

AWU national secretary Scott McDine said the Premier needed to "stop ignoring this problem and introduce a local steel procurement policy urgently".

"Mr Baird's spokesman for the Illawarra, Gareth Ward, has been telling everyone who will listen that there is no need for procurement – that it won't make a difference," Mr McDine said.

"These figures make a mockery of Mr Ward's claims. Here we have BIS Shrapnel figures showing that a local procurement plan would be worth $367 million to Bluescope."

A spokesman for Mr Baird said the government appreciated the importance of the steel industry to the Illawarra community and the NSW economy. The government was also committed to free trade and being globally competitive by reducing regulation, business taxes and red tape.

"As part of those arrangements, local mechanisms to preference local suppliers could have the effect of disadvantaging NSW and Australian steel manufacturers," the spokesman said.

"For projects valued at more than $10 million, the government requires tenderers to show how their tender will support local industry, including local jobs and skill development.

"The government is a very large customer of the Australian steel industry. Its products are used everywhere in our infrastructure and general construction works."

Wayne Phillips, secretary of the union's Port Kembla branch, said the Baird government was selling Illawarra's power assets to build roads and trams in Sydney.

"The very least they could do is use Illawarra steel in the process," he said.

"We've been spun a line from the NSW government that procurement won't make a difference. Well, here are hard numbers showing it would make a huge difference."