Designing Mannin

Designing, ng and Operating a

World-Class Down
nstream Business

Dr Tom Farleyy
Managing Director
Innoval Technology Ltd
Summary of Presentation

„ Innoval Technology
¾ Background
g

„ Designing an Efficient and Viable Downstrream Plant

¾ Market Analysis
¾ Equipment Specification
¾ Plant Design
¾ Cost Modelling

„ Developing the Right Skills

„ Achieving World-Class Standards

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 2
Innovall Technology Ltd
Innoval Technology – Our Credentials

„ Innoval Technology is an independent com

mpany providing a unique resource of
expertise to the downstream aluminium industry
¾ Formed in 2003 as a result of closure of
o one of Alcan’s Global R&D centres

„ We are a group of 26 aluminium experts – our strength is the breadth of our

aluminium knowledge
¾ Rolling and extrusion process expertise
¾ Metallurgy product expertise
¾ Surfaces expertise
p

„ Our engineers have an abundance of prod

duct and process experience
¾ Most have been supporting
pp g the industrry
y for over 20 yyears
¾ Many have held Senior Management positions
p in global aluminium companies.

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IP08-006, Slide 4
Innoval Technology – Strategic Support

„ Innoval has undertaken the following types

s of strategic support work for potential
investors in downstream fabrication busine
esses:

¾ Technical Due Diligence on existing plants

¾ Pre-Feasibility Studies and Greenfield plant design

¾ Plant investment and upgrade supportt

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IP08-006, Slide 5
Designing an Efficient and
Viable Downstream Plant
Methodical Approach

„ Market Analysis

„ Equipment Specification
¾ Technical Configuration
¾ Technology Choices

„ Plant Design

„ Cost Modelling

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IP08-006, Slide 7
Market Analysis

„ Review all potential products for the plant

¾ Home market
¾ Export market

„ Gather data on product sales prices

„ Important to have understanding of marke

et price vs. production costs
¾ Some products cost more to produce
¾ High sales price does not necessarily m
mean high profit

„ Analyse
y competition
p in home and export
p markets
m
¾ Quality required to compete in chosen market

„ Decide on which products to manufacture

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IP08-006, Slide 8
Methodical Approach

„ Market Analysis

„ Equipment Specification
¾ Technical Configuration
¾ Technology Choices

„ Plant Design

„ Cost Modelling

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IP08-006, Slide 9
Assess Technical Challenges for Chosen Products

„ Products vary in their complexity and in their difficulty of manufacture

„ The products determine what equipment is

s required in the plant

¾ Type of rolling or extrusion equipment

¾ Type of finishing operations

Example – Can Body Stock (CBS)

A single can line manufactures 2,000 cans perr
minute (1 billion per year)
10,000 tonnes of aluminium per year (2 x 14
tonne coils per day)

Some may think this is a simple product

… BUT actually it is technically demanding

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 10
 Can Body Stock - Thickness Reduction an
nd Tighter Control

Coca-Cola’s First All Aluminium Can,, 1967 Coca-Cola Aluminium Can,, 2009
(weight 21g) (weight 12g)

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Can Body Stock - Thickness Reduction an
nd Tighter Control

„ Extremely tight specification for aluminium

m
sheet thickness
¾ Correct thickness tolerance can only be
b
achieved with state of the art thicknesss
control systems ...
¾ … AND the know-how
know how to get the most from
these systems
¾ Unlikely to be achieved at start-up
„ Failure to meet specification will lead to ca
an coilil llength
th
plant jams and can strength issues ~10,000 m

Profile
(
(crown) )
~0.5%
Al strip 250 +/- 5 microns

Strip wid
dth ~ 1.8 m

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Can Body Stock – The Challenge of “Earin
ng”
Ears
„ “Earing”
¾ Anisotropic mechanical properties caused
by crystallographic texture

„ Sheet with “earing” that is out of specificattion

will
¾ Risk jamming and stoppage of the can
n
plant line
¾ Result in volume of can being too sma
all

can after re-draw and wall ironing

with severe earing

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 13
Can Body Stock – The Challenge of “Earin
ng”

„ World-class earing can only be achieved when

w rolling DC ingot through a Hot Line
that includes a Hot Tandem Mill.

Source: SMS

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IP08-006, Slide 14
Summary of Sheet Rolling Process

DC Hot reversing Hot tandem

Caster mill mill
ng
Pre-heatin
Hot coil

Scalper
Furnaces Filter

Furnaces Filter
Continuous caster
H t roller
Hot ll
(Self-
anneal)

Cold coil
Cold finish
hing Cold mill
mill

Coating Final
Inter-anneal Cold roughing mill
anneal

Doubling mill
m Cold mill
(foil)

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IP08-006, Slide 15
 Rolling Technology Configurations for Varrious Products

Hot Band Option

HRM + 4-stand HTM coil-to-coil HRM Belt Caster Roll Caster
Typical Capacity (tonnes pa) 700k 150k 120k 20k
C
Can Body S
Stock (C
(CBS)
S) 99 9 8 8
Can End Stock (CES) & Tab 99 99 8 8
Foilstock 99 99 99 99
Standards - Low Mg 99 99 99 99
Products

Standards - High Mg 99 99 99 8
99 99 8 8
P

S f
Surface Sensitive
S iti Products
P d t
Thick Products 99 99 8 8
Clad Products 99 99 8 8
Others 99 99 9 9
99 meets world class quality requirements
9 can be made
e but does not meet all quality requirements
8 cannot be ma
ade or fails to meet most quality standards.

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IP08-006, Slide 16
Making the Appropriate Technology Choic
ces

„ Need to identify correct technology options

s to achieve current customer quality
standards
¾ E.g. on-line measurement technologies

„ There are significant variations in performa

ance and price of equipment

„ Consider future proofing the equipment to meet evolving customer needs

¾ Tightening of specifications
¾ Increasing
I i coilil weights
i ht (width
( idth and
d lleng
gth)
th)

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 17
Methodical Approach

„ Market Analysis

„ Equipment Specification
¾ Technical Configuration
¾ Technology Choices

„ Plant Design

„ Cost Modelling

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IP08-006, Slide 18
Plant Design – Capacity Calculations

„ Correct sizing and multiples of equipment type

¾ E.g.
g What size of furnace and how many?
y

„ Assessment of spare capacity within key assets

a
¾ What other products could the plant make to fill any spare capacity?

„ Awareness of the magnitude of process lo

osses at every stage (recoveries)
¾ To sell 1000 tonnes of final product the
e rolling mill may need to roll 1200 tonnes

Example – Rolling Mill

The capacity of a rolling mill depends on tthe products being rolled
A rolling mill represents a significant comp
ponent of Capex so must be specified
very carefully

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IP08-006, Slide 19
Example – Rolling Mill Capacity Calculatio
ons

Product One Two Thre

ee Four Five
Final gauge [mm] 0.1 0.22 0.5
5 0.8 2
Percent of production 33% 23% 22%
% 9% 13%
Rolling time [min] 54 18 10 6 3
Handling time [min] 30 20 20 15 10
Overall capacity [ktonne/yr]
Overall capacity [ktonne/yr] 110

Product One Two Three Four Five

Removall
R Final gauge [mm]
Final gauge [mm] 01
0.1 0 22
0.22 05
0.5 08
0.8
of heavy Percent of production 39% 28% 26% 7%
gauge Rolling time [min] 54 18 10 6
product Handling time [min]
g [ ] 30 20 20 15
Overall capacity [ktonne/yr] 83

Product One Two Three Four Five

10% Final gauge [mm] 0.1 0.22 0.5 0.8
increase Percent of production 39% 28% 26% 7%
in pass
Rolling time [min] 49 17 9 6
speeds
p
Handling time [min] 30 20 20 15
Overall capacity [ktonne/yr] 87

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 20
Plant Design – Optimising Layout of Equip
pment

„ Based on knowledge of world-class opera

ations
„ Need to account for potential expansion
„ Ensure efficient process flow

„ Important safety considerations

„ WIP Calculations (buffer sizes, WIP storag
ge around plant)
¾ “Discrete
Discrete Event Simulation”
Simulation , if necessa
ary

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 21
Methodical Approach

„ Market Analysis

„ Equipment Specification
¾ Technical Configuration
¾ Technology Choices

„ Plant Design

„ Cost Modelling

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IP08-006, Slide 22
Cost Modelling

„ It is easy to build a simple Excel-based co

ost model ... BUT …

„ Need realistic model inputs based on expe

erience and expert calculation
¾ Product recovery vs year from startup
¾ Efficient staff levels
¾ R&D costs (~0.5% of turnover typical)

„ Calculation
C l l ti off C
Capital
it l C
Costs
t (CAPEX)
¾ Inclusion of all key and ancilliary equipment

„ Calculation of Operating Costs (OPEX)

¾ Requires a good understanding of the process s
¾ Computer
p models can be used to p
predict utility usage
g (electricity,
( y, gas,
g , etc.))

„ Useful to attribute costs correctly to differe

ent products

„ More complex tools can be used to analys

se the model (e.g. Monte Carlo)

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 Example of Cost Model Output

400,000 6,000,000

NPV [US$'000] 182,502

350,000 5,000,000
IRR 12%

Cumulative Cash Flow [US$'000]

300,000 4,000,000
US$'000]

250,000 3,000,000
CAPEX [U

200,000 2,000,000

150,000 1,000,000

100,000 0

C
50,000 -1,000,000

0 -2,000,000
2009 2014 2019 2024 2029 2034
YEAR

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Pre-Feasibility Study – Flow Diagram

Market products
d t Equipme
ent equipment
i t Plant
Analysis volumes Specifica
ation Design

extra capacity capex & opex

Cost Sales
IRR, NPV, etc.
Modelling prices

no
Viable?

yes Bankable
Study
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IP08-006, Slide 25
Developing
g the Right Skills
 Typical Staff Requirements for a Downstre
eam Plant

„ Typical 250,000 tonne rolled products plan

nt operating in Western World

Per Shift 4 Shift System

S Day Staff TOTAL
Graduate 60 60
Skilled Labour 60 40
24 70 310
Unskilled Labour 15 6
60 60
430

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Typical Skills Requirements for a Downstrream Plant

„ Managerial ¾ Planninng
¾ Schedu uling
¾ Finance e
¾ HR
„ Sales ¾ Sales manager
m for each major product group
¾ Techniccal Representatives at customer plants
„ Technical
¾ Metalluurgists
¾ g ers
Engine
¾ Chemis sts
¾ Materiaals scientists
„ Plant
Pl t and
d Maintenance
M i t ¾ Statisticcian
¾ Engineers
¾ Electric
cal
¾ Mechan nical
„ Other ¾ Craftsmmen
¾ Medica al
¾ Fire pro
otection
¾ Driverss

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Recruitment Issues

„ Graduates
¾ Need a g
good supply
pp y of the correct discciplines
p
¾ They will need further development an
nd training

„ Experienced Staff
¾ Internal transfer from other group operrations (if they exist)
¾ Access to “early retirees” from world-class operations
¾ Head-hunt from competitors

„ Retention of Staff
¾ Risk of competitors headhunting your g
good people
¾ Threat to both existing and new compa
anies
¾ May
y come from a related industry,
y, eg
g Steel
S and aluminium rolling
g need similar
skills
¾ Potential loss of knowledge

Commercial-in-Confidence, © Innoval Technology Ltd

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Approaches to Graduate Development

„ University-based “Centres of Excellence”

¾ Specialised
p focus ((e.g.
g Aluminium,, Rolling
g or Extrusion,, Surface Science))
¾ Sponsor students, projects and departtments

„ In-house R&D Centre

¾ Develop specific skills within R&D projects
¾ Transfer R&D people to plants in opera
ational roles

„ Ongoing Development of Staff

¾ Use specialist training courses
¾ Mentoring
M t i ffrom experienced
i d profession
f i nals
l
¾ Can be provided by independent exterrnal organisations

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 30
Training Example – Aluminium Rolling Tec
chnology Course
ALUMINIUM ROLLING TECHNOLOGY COURSE - Innoval Technology, Banbury 11-15th May 2009

MONDAY 10 TUESDAY 11 WEDNES

SDAY 12 THURSDAY 13 FRIDAY 14

Intro K Smith / T Farleyy

Outline of Sheet Rolling Thermal Aspects Lubric
cation Vibration Flatness
Process of Control
Rollng Tom Farley
The Business of Rolling Mark Foster
F Flatness Control
Tom Farley COF
FFEE Condition monitoring Workshop
COFFEE Chris Davenport Tom Farley Dan Miller
COFFEE COFFEE COFFEE
Mechanics Thermal Aspects Surface Generation
G
of Rolling Workshop Flatness
Gauge Control Control
Chris Davenport Chris Davenport Mark Foster
F

Mechanics of Rolling Mechanics of LUNNCH Dan Miller

Workshop Profile & Flatness enroute
e Jaguar Wrap up Session
Chris Davenport Kyle Smith Dan Miller
LUNCH
LUNCH LUNCH LUNCH
TOUR OF INNOVAL

Machinery of Rolling Control Systems Profile Measurement

COURSSE VISIT and Control
(JAGUAR)
Tom Farley Dan Miller Kyle Smith
COFFEE COFFEE COFFEE

Process Metallurgy
Control Systems Profile Measurement
Gary Mahon and Control
Dan Miller
Process Metallurgy Kyle Smith
Workshop Rolling Process Models Wrap up Session
Gary Mahon
Wrap up Session Chris Davenport

Free Social Event Frree Social Event

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 31
Managing Knowledge Assets

„ Important to maximise the knowledge thatt exists in employees

¾ Staff with valuable knowledge which is
s not being exploited
¾ Share knowledge of manufacturing to improve product quality

¾ Determine
D t i gaps iin th
the kknowledge
l d b base
e (R&D programme))
¾ Loss of long-serving, knowledgeable employees
e
¾ Standardise operations and develop “B
Best Practice”

„ Knowledge Management using K-Maps

¾ Team-based Workshop approach invo
olving
– Manufacturing
– Technology
– Sales

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K-Map of Aluminium Extrusion Operation

How to Build a K-Map

„ Assemble those with

knowledge

„ Define Product
Attributes

„ Define the Process

Stages

„ Define the strength of

relationship

„ Develop content via

Intranet

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IP08-006, Slide 33
K-Map Summary Level

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IP08-006, Slide 34
Achieving World
d Class Standards
d-Class
State-of-the-Art Equipment is Not Sufficien
nt

„ Realisation that investment in world class equipment does not on its own give world
class products.
„ Many examples in aluminium rolling mills and
a extrusion plants.
¾ Return on investments taking longer th
han planned
¾ Cannot match quality of world-class prroducts
¾ Need expertise that equipment supplie
ers do not usually possess

Equipment manufacturers looking to partner with product specialists to

deliver a com
mplete package

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IP08-006, Slide 36
Benchmarking & Technical Audits

„ World-class companies frequently use the

eir internal resources to benchmark their
operations against their own “Best Practice”.
¾ Team assembled forf several days to re eview and observe operations
– Experienced operators
– Technical experts
– Host plant
– Experienced facilitator

„ Output is a “gap analysis” of areas to be im

mproved.
¾ Action plan established
¾ Progress then reviewed at regular intervals
¾ Repeat visits to provide additional support, as required

„ For single-site companies the same function can be carried out by external
consultants
¾ Can also be of benefit to large multi-na
ationals to get a “fresh view”

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Typical Check-list for Technical Auditing & Due Diligence

„ Environment, Health & Safety

¾ Accident recording and rates

„ Equipment Operation
¾ Standard Operating Practices
¾ Use
U off Statistic
St ti ti Process
P C
Control
t l
¾ Maintenance schedules and strategies
¾ Investment plans

„ Operational Efficiency
¾ Machine utilisation
¾ Recoveries

„ Product Quality
¾ Test
est p
procedures
ocedu es
¾ Reject Rates

„ Technology System
¾ Approach to problem solving
¾ Product and Process improvement methods

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 38
Summary

„ An efficient and viable downstream plant can

c be designed using Innoval’s methodical
approach based on >20 years working in the
t industry
¾ Market Analysis
¾ Equipment Specification
¾ Plant Design
g
¾ Cost Modelling

„ A key stage is matching equipment specifiication to the optimum product mix in order to
maximise the financial returns from the pla
ant

„ We have emphasised the need for a broad

d range of technical skills and routes to
develop this important resource locally

„ Achieving the anticipated financial returns requires more than just state of the art
equipment and technology – but also input from world-class expertise and know-how

Commercial-in-Confidence, © Innoval Technology Ltd

IP08-006, Slide 39
Thank you for y
your
our attention …
Innoval Te
echnology
An independent company
c providing
expertise to the aluminium industry

www.innov
valtec.com