opportunities for the south african … for the south african foundry industry in the ... •...

OPPORTUNITIES FOR THE SOUTH

AFRICAN FOUNDRY INDUSTRY IN THE

GLOBAL AUTOMOTIVE SUPPLY CHAIN

METAL CASTING CONFERENCE

MARCH 2017

M KRIEG

PRESENTATION OVERVIEW

• Aluminium and the Aluminium Industry

• The South African Automotive Sector

– Policy Environment

– The Automotive Sector in South Africa

• Automotive Casting Supply Chain Investigation

• AFSA/McKinsey & Co Report 2016

• A Local Success Story

• Conclusion 2

ALUMINIUM AND THE ALUMINIUM INDUSTRY

ALUMINIUM AND THE ALUMINIUM

INDUSTRY

3


4

Scrap Collection

Product

Life

Secondary

Smelting

Manufacturing

Industry

Power

Generation

Bauxite

Extraction

Alumina

Refining

Primary

Smelting

Processing

(Rolling,

extrusions,

etc.)


5

SUMMARY OF INDICATIVE ALUMINIUM MATERIAL FLOW IN SOUTHERN AFRICA 2015

(IN THOUSAND TONS (kt)

Mozal

Mozambique

539kt

Primary

Ingot Export

519kt

Primary Ingot

Export 521kt

Extruded

Product

43kt

Cable

30kt

Rolled

Product

179kt

Castings

25kt

Deox

8 + 3 kt

Powder

2 + 1kt

Secondary

Smelters

19kt

Hillside Primary

Smelter

697kt

Imported Raw Material &

Mater Alloys

47kt

Secondary Ingot

Export 1.7kt

Semi

Fabs

Export

110kt

Semi-fab

Imports 84kt Fabricators

252kt

Finished

Product

Imports 21kt

South

African

Market

273kt

Scrap

Collected

Destructive

Mkts 14kt

Automotive + Indirect

Export 23kt

Scrap Export 64.3kt

KEY

Export

Import

Building

and

Constru

ction

22%

Electrical

15%

Packaging

23%

Consumer

Durables

5%

Mining

3%

Transpor

t

4%

Automo

tive

14%

Military

4%

Chemical

Other

4%

General

1%

Deox

5%

Prepared by: The Aluminium Federation of South Africa – February 2017

PRIMARY &

SECONDARY

RAW

MATERIALS

SEMI-

FABRICATION

FABRICATION

MARKET

17

8

8


6



Mozal

Mozambique

539kt

Primary

Ingot Export

519kt

Primary Ingot

Export 521kt

Extruded

Product

43kt

Cable

30kt

Rolled

Product

179kt

Castings

25kt Deox

8 + 3 kt

Powder

2 + 1kt

Secondary

Smelters

19kt

Hillside Primary

Smelter

697kt


Mater Alloys

47kt

Secondary Ingot

Export 1.7kt

Semi

Fabs

Export

110kt

Semi-fab

Imports 84kt Fabricators

252kt

Finished

Product

Imports 21kt

South

African

Market

273kt

Scrap

Collected

Destructive

Mkts 14kt


Export 23kt

Scrap Export 64.3kt

KEY

Export

Import

Building

and

Constru

ction

22%

Electrical

15%

Packaging

23%

Consumer

Durables

5%

Mining

3%

Transport

4%

Automo

tive

14%

Military

4%

Chemical

Other

4%

General

1%

Deox

5%


PRIMARY &

SECONDARY

RAW

MATERIALS

SEMI-

FABRICATION

FABRICATION

MARKET

17

8

8


7



Mozal

Mozambique

539kt

Primary

Ingot Export

519kt

Primary Ingot

Export 521kt

Extruded

Product

43kt

Cable

30kt

Rolled

Product

179kt

Castings

5kt Deox

8 + 3 kt

Powder

2 + 1kt

Secondary

Smelters

19kt

Hillside Primary

Smelter

697kt


Mater Alloys

47kt

Secondary Ingot

Export 1.7kt

Semi

Fabs

Export

110kt

Semi-fab

Imports

84kt

Fabricators

252kt

Finished

Product

Imports 21kt

South

African

Market

273kt

Scrap

Collected

Destructive

Mkts 14kt


Export 23kt

Scrap Export 64.3kt

KEY

Export

Import

Building

and

Constru

ction

22%

Electrical

15%

Packagi

ng

23%

Consumer

Durables

5%

Mining

3%

Transport

4%

Automo

tive

14%

Military

4% Chemical

Other

4%

General

1%

Deox

5%


PRIMARY &

SECONDARY

RAW

MATERIALS

SEMI-

FABRICATION

FABRICATION

MARKET

17

8

8

Wheels

20kt


WHY ALUMINIUM IN TRANSPORT?

8


• Light

• Strong

• Durable

• Recyclable

• Useful in Lightweighting vehicles

9

10


THE SOUTH AFRICAN AUTOMOTIVE SECTOR

THE SOUTH AFRICAN AUTOMOTIVE

SECTOR

11

POLICY ENVIRONMENT

POLICY ENVIRONMENT

12

POLICY ENVIRONMENT

Policy Environment

The Department of Trade and Industry (the dti)

-Sets manufacturing policy

-Industrial Policy Action Plan – IPAP

-Automotive Production Development Plan – APDP

Economic Development Department and ITAC

National Development Plan – NDP

13

POLICY ENVIRONMENT

The importance of consistency and certainty in Government

Policy for the Automotive Industry

14

1989-1994

1995-2012

2013-2020

2020-2035

Motor Industry

Development

Programme

(MIDP)

Automotive

Production

Development

Plan (APDP)

Master Plan

1994 2012 2020 2035

Phase 6

Local Content

Programme

1989

POLICY ENVIRONMENT

The Automotive Sector - Policy Environment

• Automotive Policies

– MIDP (1995) – export orientation

• Unit production 513 790 in 2013

• Exports 0 to 273 000

• Unintended consequence – castings imported

– APDP (January 2013)

• Vision 2020

• Less favourable for component manufacturers

– Master Plan 2020 - 2035 15

AUTOMOTIVE PRODUCTION DEVELOPMENT PLAN - VISION 2020

Volume Local

(units) Content

%

2013 2020 2013 2020

16

600 000

1.2 mil

Local

30%

Local

60-65%

POLICY ENVIRONMENT


THE AUTOMOTIVE SECTOR IN

SOUTH AFRICA

17


18


The South African Automotive Sector

638 000 Vehicles produced

50% Exports

0.65% of global production

7.5% Contribution to GDP - R233 bn

14.6% Forex Earnings – R151 bn

R6.9 bn Investments in South Africa

6% Increase in 2017

31 260 Direct Employees 82 100 Component Sector Employees

SOURCE: NAACAM 2016 DIRECTORY, NAAMSA

19


Foundries

Sand Casting

Gravity Die Casting

High Pressure Die Casting

Investment Castings

Low Pressure Die Casting

20


21

0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ton

nag

e (

kt)

Years

Castings

Cast Wheels Cast ComponentsLocal Consumption Wheels Local Consumption Components


Aluminium Castings

• Aluminium Wheel production fairly consistent

• Component casting output halved

22

AUTOMOTIVE CASTING SUPPLY CHAIN INVESTIGATION

AUTOMOTIVE CASTING SUPPLY CHAIN

INVESTIGATION

23

AUTOMTOVIVE CASTING SUPPLY CHAIN INVESTIGATION

Foundry Supply Chain

• Establishing a Competitive Improvement Initiative to

strengthen the Automotive Casting Supply Chain

– Initiated by the National Foundry Technology Network

(NFTN)

• Undertaken by AFSA together with Consultant Dr Shawn

Cunningham

– Part 1 – 13 Foundries Interviewed

– Part 2 – 4 OEM’s and Tier 1 suppliers

5 Supporting Institutions

24


Foundry Review

Tier 1 Production foundries

• Experienced Management

• Advanced computer modelling capabilities

• Competitive

• Wide range of components

25

TS 16949/

Q S 9001 ISO 18000

Cylinder Heads, Engine Blocks,

Crankshafts, Wheels

AUTOMOTIVE SUPPLY CHAIN INVESTIGATION

Part 1: Foundry Review

26

Volumes

Declining

Few new enquiries

Lack Scale

Support

Limited International partnerships

OEM Support


Part II: Customer Review

• Not competitive

• Future castings more complex (falling behind)

• OEM’s want to see investment by foundries

• Preference for an international technology partner

27

AFSA/McKINSEY & Co REPORT 2016


28


29


30

Casting production will increase to 14Kt by 2025


31


32


33

A LOCAL SUCCESS STORY


34


35


36

CONCLUSION

CONCLUSION

37

CONCLUSION

Conclusion

• Foundry industry essential to re-industrialise South Africa

• The Automotive sector can drive the casting industry

– Volume

– Technology

– Standards

– Sustainability

• Other sectors would benefit

– Mining equipment

– Agricultural equipment

– Capital equipment

– Rail and Energy infrastructure

38

CONCLUSION

Will South African be a Manufacturer or an Assembler of

passenger vehicles?

39

CONCLUSION

Will South African be a Manufacturer or an Assembler of

passenger vehicles?

Interventions are required for South Africa to be a Manufacturer:

40

Government, Dti

Policy:

Master Plan 2020-2035

• Cast and forged

components

incentivised

• Specific local content

• Affordable quality scrap

• Tax breaks

• Import tariffs to protect

cast and forged

components

Business

• Investment:

R2.5 bn

• Special

Economic Zones

Labour

Skilled Labour Force

CONCLUSION

Success Factors

41

OEM Support

VW

BMW

Renault

Toyota

Technology Partners

Global Tier 1 and Tier 2

Suppliers

Local Raw Material

Liquid and Pig primary

aluminium

Secondary aluminium

Quality Systems

ISO 9001

TS 16949

ISO 18000

Automotive Foundries

At scale foundries

Lean Manufacturing

Advanced simulation

BEE

Owner or equity partner

MUST BE GLOBALLY COMPETITIVE

CONCLUSION

Outcomes

42

Develop Society

Transformation

Job Creation

Support IPAP, NDP

Develop Economy

Increase value add

Grow GDP

Increased Export Earnings

Much needs to be done to re-invigorate and expand the domestic

casting industry. We look forward to cooperating with all key

stakeholders to make this possible.

43

THANK-YOU

AFSA

Tel: +27(11) 455 5553

Fax: +27(11) 455 5554

E-mail: [email protected]

Corporate Park, 6 Skeen Boulevard, Bedfordview

mailto:[email protected]

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