Resource efficiency benchmarking of the Russia Ferrous Foundry Industry: Key findings of the study

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

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

3. Benchmarking study time line

4. What made our study successful : Stakeholder consultations process • 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

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

6. 1 1 1 1 1 1 1 Selected KPIs Process Yield Overall production efficiency Capacity utilization Energy Fresh Sand Water Labor 2 2 2 2 2 2 2 2 2 4 4 4 4 7 7 7 7 7 7 7 7 Metal recycling Separation, transport 3 3 3 3 3 3 3 Risers and runners Scrap Melting shop Melting Holding Treatment Metal yard Storage, charging Casting shop Pouring Cooling Shake out Separation Finishing shop Shot blasting Grinding Deburring Thermal treatment Inspection/testing buy Raw material Packaging Labeling Storage Shipping Sell Molding shop Mold forming Core making Core setting Sand plant Storage, preparation 5 5 5 6 6 6 6 Sand recycling Transport, сooling Selected KPIs and methodology tailored to foundry processes 7 KPIs methodology tailored to foundry process

7. 32 category’ matrix developed to cover diversity of foundry’ production Ductile Iron Product Categories Steel Product Categories 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 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

8. Study based on real data from enterprises 215foundries (first long list; 25% of all legally registered ferrous foundries in Russia) 55 sets of independent data for foundries • Coverage : • Period : 3years (2007-2009) • Total # of data sets:150 • Categories covered:27 out of 32 (85%) • Industry:478 kt(14% of market)

9. KEY FINDINGS OF THE STUDY

10. Russia foundries significantly lag behind European Russian foundry European foundry предприятие • Russian ferrous foundry us per tone of good casting: • Energy: 3times more • Sand:3,6times more • Water:161times more • Labor :3,6 times more man-hours 4.5 mln t CO2e

11. 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 Costs: -36% EU Russia at EU efficiency level Russia

12. High levels of defect rate • Average defect rate in Russia is 4times 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) 4 times Russia EU

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

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

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

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

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

18. Information available in public domain http://www.ifc.org/ifcext/eca.nsf/Content/Russia_Foundry_Russian http://www.ifc.org/rcpp

19. IFC contacts IFC Russia Cleaner Production (IFC RCPP) Yana Gorbatenko, Program manager YGorbatenko@ifc.org Study team IFC RCPP: Kristina Turilova, Task leader KTurilova@ifc.org Boris Nekrasov, Technical expert BNekrasov@ifc.org Maria Sigutina, PR and stakeholders MSigutina@ifc.org