Resource efficiency benchmarking of the Russia Ferrous Foundry Industry: Key findings of the study Implemented under IFC Russia Cleaner Production Program

GOAL: to identify the ferrous foundry sector’ resource efficiency potential and develop practical tools for foundries to implement it 2

Benchmarking study time line START UP METHODOLOGY ADVISORY BOARD 1. Sept SELECTION OF PARTICIPANTS QUESTIONAIRS 2. October – November 2009 DATA COLELCTION ANALYSIS 3 meetings of ADVISORY BOARD 3. Jan-May 2010 PUBLIC REPORT 4. September

Stakeholder consultations at every important stage:  Methodology  Questionnaire for data collection  Self diagnostic guide  Matrix of casting types Advisory board included over 20 representatives from industry, R&D, officials and policy makers. Consultation process  Written comments on all key documents  Meetings of Advisory board  Workshops in smaller teams 4 What made our study successful : Stakeholder consultations process

7 Key performance indicators (KPIs) LABOUR KPI 7 OVERALL PRODUCTION EFFICIENCY KPI 2 PROCESS YEILD KPI 1 WATER USE KPI 6 SAND USE KPI 5 ENRGY USE KPI 4 CAPACITY UTILIZATION KPI 3 Depends on technology and processes Depends on type of final product and technology Depend on management practices and equipment What is being benchmarked? 5

Raw material Melting shop Melting Holding Treatment Molding shop Mold forming Core making Core setting Casting shop Pouring Cooling Shake out Separation Finishing shop Shot blasting Grinding Deburring Thermal treatment Inspection/testing Packaging Labeling Storage Shipping Sand recycling Transport, сooling Metal recycling Separation, transport Metal yard Storage, charging Sand plant Storage, preparation buy Sell Risers and runners Scrap 1 Selected KPIs Process Yield Overall production efficiency Capacity utilization Energy Fresh Sand Water Labor KPIs methodology tailored to foundry process Selected KPIs and methodology tailored to foundry processes 6

7 32 category’ matrix developed to cover diversity of foundry’ production Grey Iron Product Categories automatic moulding GABH= automotive engine blocks and cylinder heads GAAO = automotive other GAAG = agriculture GAMI = mining mechanized moulding GMBH = medium size engine blocks and heads (energy generation) GMAG = agriculture GMMI = mining GMGE = general engineering manual (hand) moulding GHBH = large size engine blocks and heads (energy generation) GHMI = mining GHGE = general engineering Ductile Iron Product CategoriesSteel Product Categories automatic moulding DAAU = automotive other DAGE = general engineering mechanized moulding DMAU= automotive DMGE = general engineering manual (hand) moulding DHEN = energy generation components DHCO = compressor components DHGE = general engineering automatic moulding SARC = railway components (c) SAMM = mining components (m) SAAC = commercial vehicles (c) SAGC = general engineering (c) mechanized moulding SMRC = railway components (c) SMMM = mining components (m) SMPC = pumps & valves (c) SMPS = pumps & valves (s) SMGC = general engineering (c) SMAC = commercial vehicles (c) manual (hand) moulding SHMM = mining components (m) SHPC = pumps & valves (c) SHEA = energy components (a) SHGC = general engineering (c) c: carbon steel, s: stainless steel, m: manganese; a: high alloy steel

215 foundries (first long list; 25% of all legally registered ferrous foundries in Russia ) 55 sets of independent data for foundries Study based on real data from enterprises 8 Coverage : Period : 3 years ( ) Total # of data sets: 150 Categories covered: 27 out of 32 (85%) Industry: 478 kt (14% of market)

9 KEY FINDINGS OF THE STUDY

Russian foundryEuropean foundry предприятие Russia foundries significantly lag behind European Russian ferrous foundry us per tone of good casting: Energy: 3 times more Sand: 3,6 times more Water: 161 times more Labor : 3,6 times more man-hours mln t CO2e

Costs: EU Russia Russia at EU efficiency level -36% Inefficiencies eliminate Russian foundries’ competitive advantage in low prices Prices for major resources in Russia are less than in the EU: Energy: 54% less Labor: 92% less Overheads: 71% less 11

4 times Average defect rate in Russia is 4 times higher than in EU Effect export: Russia exports less than 1% of casting Low quality – threat for internal markets as customers require certain quality (eg. automotive producers) High levels of defect rate 12 EU Russia

- 26% Cost structure index for ferrous foundry (materials, labor, energy, equipment maintenance, overheads, water and sand) How much can Russia ferrous foundry industry gain via resource efficiency? $ 3.3 bln USD $2.13 bln USD $ 3 bln USD - 29% 13

- 43% Low cost and management practices Capital investment Over 50% of the potential can be implemented via low- cost measures and management practices $3.3 bln USD Costs 14

Capital investment Low cost and management practices KPIs and resource efficiency potential: 15

Materials (metal) Energy Labor Equipment related Overheads 4,2% 43,3% 9,4% 4,4% 9,7% $ 3.3 bln USD 12,8% 7,1% 21,4% 13,4% 45,2% -3.1% -2.7% -12% -9.2% -1.9% Benchmarking of KPIs is a tool to priorities interventions to achieve maximum impact Russia average levelLevel of best practices Cost structure 16

17 Next steps: Toolkit: Self diagnostic guide, Compendium of KPIs, Best practice guide, Benchmarking study report Pilot program with 5-7 companies with foundries Resource efficiency finance directly and via FIs

Information available in public domain Content/Russia_Foundry_Russian 18

IFC contacts IFC Russia Cleaner Production (IFC RCPP) Yana Gorbatenko, Program Study team IFC RCPP: Kristina Turilova, Task leader Boris Nekrasov, Technical expert Maria Sigutina, PR and 19