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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY THE IMPACT OF IPAP AND NFTN ON THE

PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY THE IMPACT OF IPAP AND NFTN ON THE ALUMINIUM FOUNDRY INDUSTRY. PARLIAMENT 11 AUGUST 2015 Mark Krieg Executive Director: The Aluminium Federation of South Africa. PRESENTATION SUMMARY. Introduction of AFSA

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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY THE IMPACT OF IPAP AND NFTN ON THE

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  1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY THE IMPACT OF IPAP AND NFTN ON THE ALUMINIUM FOUNDRY INDUSTRY PARLIAMENT 11 AUGUST 2015 Mark Krieg Executive Director: The Aluminium Federation of South Africa

  2. PRESENTATION SUMMARY • 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

  3. THE ALUMINIUM FEDERATION OF SOUTH AFRICA 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

  4. Scrap Collection Secondary Smelting Product Life Cycle Power Generation Manufacturing Industry Alumina Refining Bauxite Extraction Primary Smelting Processing (Rolling, extrusions, etc.) PRODUCTION AND RECYCLING OF ALUMINIUM

  5. Cable ExtrudedProduct RolledProduct CastingsOther Electrical Building &Construc-tion Packaging ConsumerDurables Mining Transport Auto-motive Military General ChemicalOther STRUCTION OF THE ALUMINIUM INDUSTRY IN SOUTH AFRICA The South African Aluminium Industry encompasses the Complete Value Chain Hillside Smelter PRIMARY Imported Raw Materials Casthouse SECONDARY SecondarySmelters SEMI-FABRICATION FABRICATION USE Market Recovered Aluminium SCRAP

  6. THE ALUMINIUM FOUNDRY INDUSTRY SMELTER PRIMARY ALUMINIUM (1) SECONDARY SMELTERS ALUMINIUM ALLOYS (6) CAST HOUSE (1) SCRAP ALLOYS ALUMINIUM FOUNDRIES (77) PRIMARY (4) Based SECONDARY (73) Based

  7. FOUNDRY TYPES Sand Casters – Secondary Gravity Die Casters - Secondary High Pressure Die Casters - Secondary Low Pressure Die Casters - Primary 26

  8. ALUMINIUM CASTING PRODUCTION

  9. ALUMINIUM CASTING MARKET SEGMENTS 2013 Secondary Aluminium Castings: 5 000 tons Total Aluminium Castings: 22 000 tons Total Automotive : 20 000 tons (91%)

  10. ALUMINIUM FOUNDRY CLOSURES Secondary Smelters Closed

  11. THE NATIONAL FOUNDRY TECHNOLOGY NETWORK AFSA was closely involved in conceptionalising the NFTN

  12. FEEDBACK ON NFTN INTERVENTIONS 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

  13. TECHNOLOGY TRANSFER FROM LOCAL & INTERNATIONAL EXPERTS – SKILLS DEVELOPEMENT 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

  14. METAL SOLIDIFICATION SIMULATION • 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

  15. IDENTIFYING & SUPPORTING NEW LOCALISATION AND/OR CASTING OPPORTUNITIES Do foundries in the Automotive supply chain need a Competitiveness Improvement Initiative(CII)? High level assessment of foundries in the automotive supply chainwas undertaken – NFTN/AFSA • 2012 • 2013

  16. SURVEY OF AUTOMOTIVE FOUNDRIES 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)

  17. SURVEY OF AUTOMOTIVE FOUNDRIES Tier 1 Production Foundries Products Qualified to OEM Standards Cylinder Heads, Engine Blocks, Cam Covers, Wheels TS 16949/ Q S 9001 ISO 18000

  18. SURVEY OF AUTOMOTIVE FOUNDRIES Customers Procurement • Global strategic sourcing • Purchasing decisions often not taken in South Africa AUDI, BMW, FORD, GM, MERCEDES BENZ, NISSAN, TOYOTA, VW

  19. SURVEY OF AUTOMOTIVE FOUNDRIES 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 THE AUTOMOTIVE FOUNDRY SECTOR IS AT RISK

  20. SOPHISTICATED CORE MAKING CAPABILITY

  21. GRAVITY SAND CASTING

  22. STATE-OF-THE-ART HIGH PRESSURE DIE CASTING MACHINE

  23. HIGH PRESSURE DIE CASTING

  24. SURVEY OF AUTOMOTIVE FOUNDRIES 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)

  25. SURVEY OF AUTOMOTIVE FOUNDRIES 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

  26. SURVEY OF AUTOMOTIVE FOUNDRIES 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

  27. ALUMINIUM IN THE TRANSPORT SECTOR • 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

  28. A PAST, PRESENT & PRACTICAL: A LOOK AT THE GLOBAL FUTURE FOR ALUMINIUM IN LIGHT VEHICLES

  29. SOUTH AFRICA: AUTOMOTIVE PRODUCTION & DEVELOPMENT PROGRAM (APDP) VISION 2020 Volume Local (units) Content % 2013 2020 2013 2020 1.2 mil Local 60-65% 600 000 Local 30%

  30. THE NATIONAL LOCALISATION INDABA 28-29 JULY 2015 “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

  31. THE NATIONAL LOCALISATION INDABA 28-29 JULY 2015 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

  32. THE NATIONAL LOCALISATION INDABA 28-29 JULY 2015 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

  33. Competitiveness and cost of production 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

  34. CONCLUSION 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

  35. THANK YOU THE ALUMINIUM FEFERATION OF SOUTH AFRICA AFSA Tel: +27(11) 455 5553 Fax: +27(11) 455 5554 E-mail: afsa@afsa.org.za Helvetia House, Greenvale Road, Wilbart, Germiston

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