Introduction of AFSA

The aluminium lifecycle and industry

- Primary Aluminium

- Secondary Aluminium

Feedback on NFTN interventions

Survey of foundries supplying the automotive industry

The importance of aluminium in transport

Update on the opportunities in the automotive sector – LOCALISATION INDABA 28-29 July 2015

Concluding remarks

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THE INDUSTRY ASSOCIATION OF THE

SOUTH AFRICAN ALUMINIUM INDUSTRY

• Purpose of AFSA

– Promote the use of Aluminium

– Promote the South African Aluminium Industry

– Promote and represent the interests of its members

• Members include

– Smelters

– Secondary Smelters

– Semi Fabricators

– Fabricators

– Foundries

– Distributors

– Suppliers

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Scrap Collection

Secondary

Smelting

Manufacturing

Industry

Power

Generation

Bauxite

Extraction

Alumina

Refining

Primary

Smelting

Processing

(Rolling, extrusions, etc.)

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5

The South African Aluminium Industry encompasses the Complete Value Chain

Market

Recovered Aluminium

SECONDARY

SEMI-FABRICATION

FABRICATION

USE

SCRAP

PRIMARY

Cable Extruded Product

Rolled Product

Castings Other

Chemical Other

General Military Auto-

motive Transport Mining

Consumer Durables

Packaging Building & Construc-

tion Electrical

Secondary Smelters

Hillside Smelter

Casthouse Imported

Raw Materials

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SMELTER PRIMARY ALUMINIUM (1)

SECONDARY SMELTERS ALUMINIUM ALLOYS (6)

CAST HOUSE (1)

ALLOYS

ALUMINIUM FOUNDRIES (77)

SCRAP

PRIMARY (4) Based

SECONDARY (73) Based

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Sand Casters – Secondary Gravity Die Casters - Secondary High Pressure Die Casters - Secondary Low Pressure Die Casters - Primary 26

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2008 2013

TONS TONS % CHANGE

Aluminium Casting Production

35 000 22 000 -37%

Wheel Production - Primary Aluminium based

25 000 17 000 -32%

Component Castings -Secondary aluminium based

10 000 5 000 -50%

Total Aluminium Castings:

22 000 tons

Total Automotive : 20 000 tons (91%)

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Secondary Aluminium Castings:

5 000 tons

Secondary Smelters Closed

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Foundries Direct Jobs Indirects

2000-2010 33 842 2998

2011-2015 5 120 estimated 450 estimated

Total to date

38

962

3448

Secondary Smelters

To date 2

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AFSA was closely involved in conceptionalising the NFTN

Numerous Technical Benchmarks on Foundries were completed

Energy Audit

• One foundry reported an energy cost reduction of 21%

• Another launched a major energy saving program that reduced energy intensity from 900 kwh/T to 675 kwh/T - A 25% REDUCTION

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Providing continuous technical support to Foundries to reduce scrap rates and enhance productivity

Aluminium die casting specialist visit(s)

• Recommendations turned companies around

• Die design expertise resulted in:

– reduced specific energy

– quality improvement

– reduced scrap

– improved competitiveness

Training initiative

• Production manager delighted with effectiveness of shopfloor training:

– Boosted knowledge and morale on the shopfloor

– Mangement gained new insights

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Metal Solidification Simulation

• One foundry will not implement a new die without simulating the solidification

• Results in:

– Improved quality

– Less porosity

– Less scrap

– Improved competitiveness

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High level assessment of foundries in the automotive supply chainwas undertaken – NFTN/AFSA

2012

2013

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Tier 2 and 3 suppliers

Smaller, jobbing foundries

Automotive component orders increasing

Often new to the Automotive Industry

Conclusion

Tier 2 and 3 foundries will continue to benefit from NFTN type Continuous Improvement Initiative (CII)

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Tier 1 Production Foundries

Products

Qualified to OEM Standards

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ISO 18000

TS 16949/ Q S 9001

Cylinder Heads, Engine Blocks, Cam Covers, Wheels

Customers

Procurement

Global strategic sourcing

Purchasing decisions often not taken in South Africa

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AUDI, BMW, FORD, GM, MERCEDES BENZ, NISSAN, TOYOTA, VW

CONCLUSION

Tier 1 foundries in the Automotive supply chain are qualified to international automotive standards

Significant investments have been made in state-of-the-art equipment

Foundries have benefited from interventions

However

Volumes too low to be competitive and are shrinking

No new model range orders

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THE AUTOMOTIVE FOUNDRY SECTOR IS AT RISK

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Customer Perspectives

Findings

Support the APDP and Vision 2020

Surprised by extent and diversity of the local Foundry Industry

Would prefer a local casting supply chain which is:

– Competitive and secure

– With an international partner (preference for international tier 1 supplier)

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However

Local foundries are not competitive

Reject rates too high

Future castings will be more complex (falling behind)

OEM’s want to see investment by foundries and engagement with an international partner

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OVERALL CONCLUSION

Many foundries in the supply chain have benefitted from NFTN inititiatives

• Smaller foundries see increased volumes

• Production foundries are qualified to international automotive standards

• No new model orders

• Volumes too small to be competitive

• Significant opportunities exist

• Customers believe foundries are not competitive and want to see investment and overseas technology partners

Will require a significant intervention

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Legislation requires reduced GHG emissions in the transport sector

Reducing the weight of vehicles achieves this

• Aluminium has a variety of properties that make it very effective in the design of passenger vehicles

– It is 1/3 the weight of steel

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VISION 2020

Volume Local

(units) Content

%

2013 2020 2013 2020

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600 000

1.2 mil

Local 30%

Local 60-65%

“Global Automotive Industry represents a major development for South African based component manufacturers.”

But intense international competition exists

Key Question 1

Will South Africa be a manufacturer or an assembler?

As a manufacturer

Deep localisation of component manufacture

As and assember

More limited localisation

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Localisation increased in 2013 to 2014

8 Sectors increased

-Trim

- Metal Pressing

- Electronics

- Plastic Mouldings

However

3 Sectors, including the foundry and forge sectors, declined

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Key Question 2

Can South Africa become a manufacturer of vehicles if it fails to (re)build its foundries and forges?

OUR VIEW

Castings are essential to any manufacturing sector

The challenge is to maintain and grow the remaining foundries

Scrap at a preferential price would immediately make the industry more competitive

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Cost of producing aluminium die castings

Raw material makes up 40% of the cost of an aluminium casting

The raw material is secondary aluminium which is based on aluminium scrap

Scrap is a key cost driver in producing castings

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Many NFTN interventions have been successful and very valuable to the foundry industry

Interventions have assisted foundries to become more competitive, and ensured the survival of some foundries

Foundries have upgraded equipment and skills, and are more competitive with relatively low cost interventions and investment

Improved skills, processes, local and international know-how and technology lay the foundation for future expansion

The challenge is to maintain and develop the remaining foundries as new opportunities develop

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AFSA

Tel: +27(11) 455 5553 Fax: +27(11) 455 5554

E-mail: afsa@afsa.org.za

Helvetia House, Greenvale Road, Wilbart, Germiston