Over 250 participants, including premier decision makers from global foundries and end-user sectors, took part in this year’s International Foundry Forum - a premier event for disseminating relevant information to those trading in the metal casting sector. Lynn Postle reports on the event for Foundry Trade Journal.
During uncertain times, industry needs to rely on past and current statistics and trends to predict the future shape of trade, CAEF president Luis Filipe Villas-Boas told delegates as they settled down for two days of data-packed presentations in Venice at the end of September. Throughout the event delegates were equipped with information on the future of manufacturing, competitiveness, internationalisation, material and design trends, and product application opportunities. They were also treated to the latest regional reports from those operating in the foundry sector in Europe, China, India, Japan, Russia, and both South and North America.
The event is organised every two years by the European trade associations - CAEF and CEMAFON - to allow CEOs in foundries and from end-user industries to meet and report on long-term prospects for the cast metals industry.
Villas-Boas said: “The future development of industry is ‘foggy’ with the non-ferrous sector performing better than the ferrous sector. Whilst the general engineering outlook for 2014 is good there has been a reluctance to invest in many areas due to uncertain geo-political situations. The foundry industry must respond by identifying the new developments and challenges of the markets we supply and adapt our processes accordingly – we must always operate a ‘changing’ system.”
He also said it was “very important” to have a closed-loop on running costs such as yield, energy, process control etc.
SMART PRODUCTION FOR SMART PRODUCTS
He enthused about the opportunities for the foundry industry in terms of reduction in car weights. “Castings can provide less weight and more intricate shapes – we offer smart production for smart products.” He urged the industry to create electronic networks as they offer the potential to make a business more successful and more profitable.
CEMAFON president Gabriele Galante echoed the CAEF president’s sentiments. “General trends are much less evident today,” he said. “But it is a necessity to know what is happening in different countries and different sectors.”
A WORLD IN TURMOIL
“There are more than 50 conflicts affecting business throughout the world and embargoes on international trade. We have to ask questions like, ‘will the current situation turn Russia away from the west to do business with the east instead’?” The answer to this came from Andrew Dibrov of the Russian Foundrymen Association who spoke about the current status of the industry and said: “We need modern moulding equipment and medium frequency furnaces in Russia. But geo-political issues mean a move from working with the west to the east. Financing also comes from the east now. Equipment from Europe and the United States will not be paid for until it is delivered in Russia for state-owned companies. Preference will be given by Russian banks to Asian suppliers. Preference will also be given to European companies which have production facilities in Russia or Asia.”
Galante spoke of how the world is changing. “The tendency to build where you sell is changing the supplier situation. Also, if we want to do something innovative, we need innovative suppliers. The emerging market is establishing ‘benchmark’ prices. We have to commit ourselves to exchanging information openly. Knowledge is the most important asset for our companies – including knowledge of the wider markets.”
THE FUTURE OF MANUFACTING IN EUROPE
“Europe needs to catch up and compete with global players,” said Marco Felisati, deputy director for industrial affairs at CONFINDUSTRIA (the Italian employer’s federation) when he addressed the audience about competitiveness and growth. “Networking is a very effective way to face the challenges of increasing competitiveness and vertical integration is important.”
He cited energy expenses – twice the price in Europe as they are in China and the US and even higher than the European average in Italy – as incredibly important. “We need to find resources to boost the economy,” he said. “Growth in Europe is lagging behind. A strong Europe does not help our exports.” He called for a diplomatic solution to the embargoes placed on Russia to allow Italian companies to re-establish economic and commercial links. “The sanctions on Russia are having a big impact with the industrial sectors in Italy being severely hit.”
A GLOBAL EUROPE
Felisati called for a re-think of administrative burdens within Europe. “We do need legislation but we need to inter-connect our industrial policies with what Europe aims to do outside its borders – a global Europe. There is no point putting money into certain sectors then penalising those sectors when they attempt to do business. We are looking for strong reform but the fiscal costs of companies are one of our pre-occupations. Companies face difficulty obtaining credit to make investments to trade abroad.”
The level of trade beyond national borders was emphasised by Dr Ralph Niederdrenk of PriceWaterhouseCoopers who illustrated in his speech about ‘Internationalisation in the automotive industry’ that in 2001, 49 per cent of vehicles produced in Germany were sold worldwide; in 2013 this had dropped to 35 per cent. Important vehicle models such as the Audi A6 and the Mercedes-Benz C Class are increasingly being produced outside of Germany.
Speaking about Audi and VW plans to build new plants in emerging markets, he said: “Emerging markets show growth while Germany will stagnate in the medium term.” He also predicted: “Future production capacity expansions will take place outside Germany with the main plants to be in the US and China. The automotive value chain in Europe will therefore stagnate.
“VW intends to build four new plants in emerging markets up to 2017. They will save transportation (freight) costs and save import duties and they will benefit from lower labour costs. Whilst Audi has set up a total supplier network in China and will customise vehicles to suit local needs.”
The predicted numbers quite literally speak volumes – there were 16 million vehicles produced in China in 2012, this figure is set to rise to 26.9 million by 2019. China will account for 25 per cent of the market overall. He warned: “You have to be there to benefit from this trend” which he said was driven by second and third tiered cities with around five to ten million residents who want cars.
He claimed the key challenge was the change of the supplier network: “OEMs are reducing the number of suppliers they use to reduce complexity and lower logistics costs and OEMS are looking to use suppliers with international footprints. Quite simply you will lose profitability if you do not set up production worldwide.”
In a comparison of the metal castings figures for Germany and China over the last ten years, the figures highlighted the changing situation. In 2004 casting production in Germany was 5mt and by 2012 (the last official recorded statistics at this moment in time) it was 5.2mt, whereas in China the results were 22.4mt in 2004 and 42.5mt in 2012.
He enthused: “Foundries need to follow their customers and internationalise – local suppliers in emerging markets gain importance.”
In an impassioned response, Ionnis Ionnadis, vice president of CEMAFON, said: “Europe is still number one in terms of highly skilled suppliers and we must not forget that. From 2017 the US will become a major exporter of gas and we shall have to wait and see the effect this will have.”
The innovative way in which Audi is adapting car bodies for lightweight design was a particularly enlightening presentation showing how developments in this sector will ‘shape’ the components of the future. Christopher Thoma of Audi told delegates about the two approaches the automotive giant employs to reduce weight in its vehicles – new materials, and geometry of the casting part.
An example of a new material is the rear frame of the Audi A8 which is now a magnesium die casting rather than an aluminium extrusion. Whilst an example of a change in geometry of the casting part can be seen in the front suspension mount of the Audi A6 which changed from a welding group of ten steel sheets to a high pressure die casting providing integration of suspension components.
He said: “For efficient lightweight design you have to combine both methods, for example the ASF® Space frame for the A8.”
To accommodate the need to develop casting specific solutions to the weight reduction dilemma, Audi built its own foundry to produce high pressure die castings for car body structures at Munchmunster, Germany.
Adjacent to the aluminium HPDC foundry (equipped with fully automated Frech die casting cells), mechanical processing of structural components takes place. The foundry produces an AlSi10mg front suspension housing weighing 3.4kg; a 7.8kg AlSi10mg front suspension seating; and a connector side member and door sill in AlSi9Mn.
He said: “Lightweight design and structural components in high pressure die casting will play a significant role in the Audi lightweight strategy.”
As a newcomer to the casting industry Dr Wolfgang Hiller of Buderus Guss/Bosch gave a presentation entitled: ‘Fresh look on the casting industry.’ With an electronics background, his involvement in the casting sector has occurred following the acquisition of Buderus by Bosch in 2003. The Buderus Casting Company operates as an independent business producing around 300,000t of brake discs a year equating to around 18m castings per annum. He said: “It was a culture shock coming to the iron casting industry from the electronic industry. We have to accept that cast components are not a commodity they are very complex products and need experience and knowledge to produce. In the casting industry you have to work hard to predict failures as you cannot always solve this quickly as you can in the electronics industry.”
The Buderus Casting Company has doubled its turnover in the past five years and Hiller said the company was looking to repeat this. “There is always a price/cost pressure,” he said. “Automation in process technologies is a MUST – perhaps you can save weight and materials. Reduction in CO2 emissions is also a MUST and particle emission is a huge problem for us. We also have to look at issues such as the growth in electric vehicles – you don’t brake so much in these so this will change our business. We also have to develop our global footprint because of demands from customers – we have to deliver not just in Europe.”
CONNECTIVITY
Hiller spoke extensively about the need to embrace connectivity and traceability and how Industry 4.0 could offer the solution. “You have to interconnect both your facilities and products in your own company and with the suppliers and the customers using data collection, data mining and data allocation. We must deal with a huge amount of data and we need to improve predictive maintenance/pre-warning systems. The challenges for the foundry industry will be combining different cultures and competencies such as casting, electronic and software/internet; and introducing sensor technologies.
“We need to create an innovation path to intelligent casting products and we must introduce electronics to the casting world. Castings 4.0 is about ‘interneting’ so all things connect and communicate with each other.”
Following the enthusiasm he finished with words of warning. “This needs to be introduced in phases – we can’t just take a leap from nothing to everything!”
FOUNDRIES TELLING IT LIKE IT IS
During the afternoon session of the first day presentations were given by Josef Ungerhofer of Dynacast, Radhakrishna Kasani of Emirates Techno Casting (Pentair Group) and Dr Francesco Rondinelli of CNH Industrial. Each presentation considered trends in specific sectors, namely – the automotive industry, valves and pumps industry and capital goods sector.
Josef Ungerhofer said Dynacast had done 80 per cent of its investments in aluminium production as this was the company’s growth area. He said the growth projections for the company’s small high pressure die cast components in aluminium were 20 per cent year on year because of an increase in safety and electronic equipment in the automotive industry.
Radhakrishna Kesani meanwhile spoke of the need for foundries to create competitive advantages. Speaking about the pressures of supplying steel castings for the pump and valve sector, he said: “Foundries must adapt to new technologies such as 3D printing which is coming rapidly in the industry. Wooden patternmaking in a steel foundry is a long process so rapid prototyping and 3D printing improves this. There is no dimensional limit - moulds can be made up to 2m utilising 3D printing.”
He spoke of the price sensitive market the company operates in. “It is very difficult to make defect-free steel castings. Today all valve and pump manufacturers want fully machined castings so we need to keep the technology high.” He also discussed the market factors which are driving the sector. “Accidents in the oil and gas industries have changed the dynamics. End-users are getting involved with the production of castings and larger sized pipes are increasing the pressure on designs. Quality issues such as material integrity and increased inspections from end users are resulting in higher scrutiny. Surely the future focus for foundries will be higher productivity and more automation?” he asked.
Speaking about the agricultural, commercial vehicles and construction equipment markets, Dr Francesco Rondinelli said there was a shift of focus from direct material cost to full manufacturing cost. “We must adopt a ‘best place to buy’ approach.”
Despite the many calls throughout the event for foundries to internationalise, Dr Thomas Schlick of Roland Berger said small suppliers had suffered from the high costs associated with “going global”. He said: “The key is innovative products with higher differentiation potential and greater OEM willingness to pay. The results show that product innovators do better than process specialists.” He outlined the five success factors to be:
• USP (unique selling point)/technical differentiation
• Product segments with above average growth rates
• Efficiency improvement efforts
• Product and engineering footprint outside TRIAD markets
• Good organisation of processes and structures in global set-up
Jaymie Forrest of Alexander Proudfoot gave a presentation entitled: ‘Leveraging supply chain to improve working capital’. She spoke of how companies needed to understand the impact their service policies had on the customer. She also explained how important the objective of speeding up the order to cash cycle is and she urged delegates to investigate improvement areas in their supply chain processes to achieve faster payment.
NO INVESTMENT EQUALS A DIFFICULT LIFE
In closing the Forum, Gabriele Galante warned delegates that although the world is a different place now, successful companies and industries have to adapt to the new situations. He said: “Research and development are important but it takes a huge investment to improve processes, we must have enough resources to do this job as no investment equals a difficult life.
“Intelligent manufacturing is required. For us, intelligent casting is a machine which can cope with changing parameters to produce something else. We don’t have enough possibilities to train young people. We need traditional knowledge in the foundry which can be put together with new technology – this is the future of the foundry. We need the people who can do this.”
REGIONAL SNAPSHOT
Day two of the International Foundry Forum is about sharing world foundry industry statistics and predictions from regional representatives. The following is just a taster of the information divulged to attendees.
South America
Argentina, Brazil and Mexico were considered as the only three Latin American countries with established foundry industries. Brazil is currently suffering from being unable to structure an industrial policy and a pending presidential election. Consequently, total production has been reduced. There are exceptions to this such as Tupy - the world’s largest heads and blocks foundry – which has built a new facility and which exports 70 per cent of its production. Teksid has also built a new facility. The automotive industry accounts for 58 per cent of foundry production in Brazil. Consolidated growth is expected from 2016 onwards.
Mexico and Argentina are also very dependent on the automotive industry. In Argentina 68 per cent of castings are in iron, 23 per cent in non-ferrous and 9 per cent in steel. In Brazil it is a different picture with 83 per cent iron, 9 per cent non-ferrous and 8 per cent steel. Mexico has greater balance with 50 per cent iron, 45 per cent non-ferrous and 5 per cent steel.
North America
Al Spada of Modern Castings reported that the North American foundry industry is “revitalised”. He said: “It is much more positive now with lower energy costs and other opportunities.” Of the 1,978 foundries, 80 per cent are small businesses with less than 100 employees. There had been stagnated growth in grey iron and steel casting but metal casters supplying the automotive and rail sectors have seen growth, whilst those supplying the agriculture and mining sectors have witnessed a drop.
Spada said many factors accounted for the recent resurgence including: low energy costs, low labour versus high productivity, shipping costs, global sourcing and regionalised globalisation, and reshoring. He said the country’s strengths were: technology development, easy automation/high technology/new materials. The main threat is the silica exposure limit reduction.
Japan
Representing the Japanese foundry industry, Hiroyoshi Kimura said exchange rate issues continued to dominate. He said: “We need to work on mechanisation by capital investment. We know that casting products will shift to those with high added value. However, electricity rates are rising as are the fuel costs of thermal power plants (the alternative to nuclear). This is a problem since the nuclear plants closed following the earthquake disaster in 2011.”
The industry has focused efforts on improving training and development with several options now available in the country for those entering the industry and more mature students.
Russia
Andrew Dibrov of the Russian Foundrymen Association reported that as Russia is not well-developed, the automotive industry was not such a large proportion of the country’s GDP. “The foundry industry predominantly produces steel castings but there is a growing trend in aluminium and magnesium castings. However the number of foundries remaining open is dropping as we are losing three to four per cent year on year and no growth is expected in the country’s GDP in 2014. Two new foundries have opened in recent years.” He reported that greensand production was reducing as the move towards no-bake production continued.
India
It was reported that there were plenty of foundry expansions in India with cluster upgrading schemes aiding this.
The prediction was that the foundry sector would grow by 10-12 per cent in 2014-2015 and the future plans for the Institute of Indian Foundrymen would concentrate on energy conservation and education and training.
China
Ping Wen of the China Foundry Association reported that China is undergoing an industrial restructuring exercise.
In May 2013 The Ministry of Industry and Information Technology launched the Access to the Foundry Industry scheme in China to standardise the market and upgrade facilities. Other objectives include the promotion of energy saving activities and emission reductions to lead sustainable development of the industry in the country.
It was reported that companies will now have to establish an energy management system which meets global standards and that many smaller foundries will cease to operate under the new rules. However, more foundry equipment will need to be purchased to help foundries upgrade.
In terms of casting materials it was reported that aluminium casting production is growing at a greater pace (16 per cent) than ductile iron, the latter material seeing a 6 per cent growth rate.
Europe
Speaking on behalf of 20 European nations, Heiko Forrest of Alexander Proudfoot said that the volume of European non-ferrous casting production had almost returned to the levels prior to the economic slump. The positive growth rates were driven by the automotive industry. In terms of export figures, European nations export 36 per cent of their castings but this is primarily to their neighbouring nations, only 14 per cent are exported outside of Europe.
Trends included component conversions (e.g. door frames from sheet metal to aluminium die castings); additive manufacturing; and the move towards the smart foundry.