Foundry Industry 2025 – Tomorrow‘s Challenges due to

Changing Market Conditions

Beijing, 15th of May, 2018
Dr. Heinz-Jürgen Büchner
Agenda
2

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
Agenda
3

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
Still Fears about secular Stagnation, …
4

USA: Long-term Development of GDP Growth Population over 65, in % of total Population

10 30

8
25

6
20

4
15
2

10
0

5
-2

-4 0
1950 1957 1964 1971 1978 1985 1992 1999 2006 2013 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

GDP growth; in % yoy

China Germany Japan USA
Average GDP growth per decade; in %

Source: Fred (Federal Reserve Economic Data)

… but global Economy is robust
5

GDP Growth, in % yoy1) Container Index (sa), Index 2010 = 1002)

140
2009-
2014 2015 2016 2017 2018F 2019F
2013*
135
USA 1.1 2.6 2.9 1.5 2.3 2.6 2.8
Euro-Zone -0.4 1.4 2.0 1.8 2.3 2.1 2.0 130

Russia 1.1 0.8 -2.8 -0.3 1.8 1.7 1.7 125

China 9.0 7.3 6.9 6.7 6.8 6.5 6.2
120
India 7.3 7.5 7.9 7.1 6.5 7.3 7.3
Brazil 3.3 0.5 -3.5 -3.5 0.8 1.7 2.5 115

Japan 0.4 0.4 1.4 0.9 1.7 1.3 1.1

110
Others 3.2 3.3 2.9 3.0 3.1 3.5 3.4
World 3.2 3.6 3.4 3.2 3.7 3.9 3.9 105

100
In Detail

 The Container Index declined in March 2018 after a strong 95

upward revision of the index for January and February 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018

 This was mainly the result of lower container handling in

the harbors of the US-Pacific coast and some Chinese
harbors

Sources: 1) EIU; IKB forecast 2) RWI/ISL

US Economy with high Trade Deficit
6

Monthly Trade Deficit; in million US-$ ISM Manufacturing Industry

Consumer Price yoy; in % In Detail

 The US-Economy has shown a strong monthly trade
deficit for several decades. The high level of private
consumption of the US citizens could not be satiated by the
domestic production. Import tariffs are not the solution
 But the medium-term outlook for the economy is positive,
signalled by the ISM-Index, even if the index declined
slightly in March 2018
 The US inflation rate (2.4 %) equals the expectations of the
Fed. Therefore, the Fed is going to raise the interest rate
three times in 2018

Source: Bloomberg
China: January with high Car Sales
7

Real GDP qoq; in % Sales Light Vehicles; in mill.

16 3
14
12
10
8 2
6
4
2
0 1
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Jan. March May July Sep. Nov.

2014 2015 2016 2017 2018

Caixin PMI (50 = Expansion level) In Detail

 China‘s economy grew by 6.8 % in the first quarter of
54
2018. For the whole year a GDP growth of between 6.5
and 6.8 % is expected
51  In the first quarter of 2018, the sales of new light
vehicles equaled 6.1 million units: An increase of 2.6 %
compared to the previous year
48
 Therefore, we see another year of high car sales in China
 The Chinese purchase manager index Caixin, which
45
2014 2015 2016 2017 2018 mainly represents the private economic sector, stabilized
on a high level in April. Caixin signals a further growth

Source: Bloomberg
Euro Zone: Further Growth expected
8

Real GDP qoq: in % Industrial Production; Jan. 2008 = 100

110

100

90

80

70

60
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Eurozone Germany Spain France Italy

In Detail
 The economy of the euro zone grew by 0.6 % qoq in
the fourth quarter of 2017
 With the exception of Italy all bigger euro countries
like Germany (+0.6 %), France (+0.6 %) and Spain
(+0.7 %) expanded very strongly. The development in
Spain is not negatively influenced by the conflict situation
in Catalonia. France was on a stable growth path in 2017
 Italy is below the expectations with a growth of only
0.3 % qoq. In 2017 the GDP increased by only 1.5 %
 The industrial production in the euro zone will show
another year of growth

Source: Eurostat
Crude Oil: Geopolitical Disturbances
9

Brent Blend; US-$/Barrel1) High Realibility of Supply

160
 For 2018 a strong rise of the worldwide demand for crude
140 oil will be seen. We expect an increase of 1.63 mbd (million
120 barrel per day) to 98,7 mbd
100  In addition to a higher oil production in Non-OPEC
80 countries an OPEC production of 39.1 mbd will be
60 necessary. In the first quarter of 2018 the monthly
40 production of the OPEC was below this level, therefore a
20 higher OPEC oil production is necessary during the
0 current year
2007 2009 2011 2013 2015 2017
 But we have seen a rise in geopolitical disturbances,
e.g. the war in Yemen, the war in Syria and the political
instability in Venezuela. But the highest risk in our point of
Active Oil Rigs USA2) view is the cancellation of the nuclear agreement with
Iran by President Trump
 The global crude oil inventories decreased very slowly
during the last 12 months
 The number of active oil rigs in the United States of
America increased slightly to around 825, significantly
below the peak
 Therefore, we forecast a crude oil price of around
80 US-$ per barrel Brent for the next three months of
2018. WTI will be around 4 to 6 US-Dollars per barrel below
the Brent price

Sources: 1) Bloomberg 2) Baker Hughes North America Rotary Rig Count

Agenda
10

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
Mechanical Engineering: Slight Recovery in Europe, Growth in Asia
11
In € billion

North America Europe China

754 768 826 818

337 337 342 354 734 794
322 709 706 764
720

2014 2016 2018 2020 2022 2014 2016 2018 2020 2022 2014 2016 2018 2020 2022

Rest of the World Other Asia

457 462 473 482

396
62 54 56 57 61

2014 2016 2018 2020 2022 2014 2016 2018 2020 2022

 Globally, we expect further increases in demand for mechanical engineering products

 Sales in China will recover after a drop in the current year. Chinese sales will nearly equal the combined sales of the rest of
Asia and North America
 In Europe, Germany and Italy will gain market share compared to other western European states
 In the mechanical engineering industry there is a movement towards lightweight construction (robotics, machine tools, etc.)

Source: VDMA, IKB estimates

World Market for Electric Products and Electronics
12
In € billion

America Europe China

2204 2469
995 1064 1867 1978 2038 2119
825 833 858 901 928 956 975 672 685 699 713 727 749 764 787
834 1538 1646 1761

2015 2017 2019 2021 2025 2015 2017 2019 2021 2025 2015 2017 2019 2021 2025

Rest of the World Other Asia Oceania /South Africa / Egypt

1007 1047 1108

840 851 861 886 912 968

68 71 75 75 77 80 81 84 92 65 66 67 68 70 72 75 77 83

2015 2017 2019 2021 2025 2015 2017 2019 2021 2025 2015 2017 2019 2021 2025

 The global market for electric products and electronics was estimated with around €4,500 billions in 2016. By 2025 we see a
production volume of above 5,600 bn. Euros
 During the next years a stable growth is expected. The growth rate in China will fluctuate between 5 and 7 per cent after
double-digit rates in previous years
 We expect an increasing production in all major sub-segments of the market

Sources: ZVEI, IKB forecast

Construction Sector: Further Growth Prospects
13

Urbanization and Development of Megacities1) Forecast Global Construction Sector

5%
Americas
22%
Total: Europe
10.2
47% trillion Asia / Pacific
US-$
26%
Middle East /
Africa

Megacity in 2014 Megacity in 2030

 The global construction industry will be on a stable growth path during the next five years. We do not only expect a strong
urbanization process in the emerging markets. By 2030 several new „megacities“ will have been developed
 Between 2017 and 2021 the global construction output will grow at an average of 2.8 % a year to more than 10 trillion US-$
 China, the US, Japan, India and Germany will account for more than a half of the global construction output in 2021
 Therefore we forecast a rising demand for construction-related casting products in the major markets. Mainly iron cast will
profit from this development

1) Megacity: > 10 mill. inhabitants

Sources: Euroconstruct, UNEP, CIC
Production of Light Vehicles
14
In million

China
Europe
30.4 31.8 33.0
North America 27.4 27.9
22.4 22.9 23.6 24.0 23.0
20.2 21.5
17.0 17.8 17.6 18.7 18.5 18.3

2014 2016 2018 2020 2022 2024

2014 2016 2018 2020 2022 2024
2014 2016 2018 2020 2022 2024

Japan/ Korea
Middle East / Africa
.13,7 12.9 13.0 12.6 12.3 12.2
2.0 2.3 2.7 3.1 3.3 3.2

2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024
South East Asia

Latin America 11.9 13.2

8.4 9.1 10.6
7.8

3.8 2.7 3.2 3.5 4.0 4.3

2014 2016 2018 2020 2022 2024
2014 2016 2018 2020 2022 2024

 The European automotive industry recovers. The growth is stronger in the Eastern European countries
 The market share of German OEM increases
 Within the NAFTA we see a rising importance of Mexico: New manufacturing plants of several global OEM‘s are under
construction or in extension
 Japan and Korea lose production volume to new manufacturing plants in China

.
Source: IHS June 2017
CO2 Emission Standards induce Improvements of the Combustion Engine …
15

CO2 Emission Targets for newly registered Passenger cars

CO2 (g/km)
1 (32.0%) 2 (42.9%) 3 (40.7%)
CAGR (4.7%) CAGR (3.6%) CAGR (4.6%)

172 167 163

147
127 123 130
117 113
93 95
68-78

2012a 2015p 2020p 2025p 2012a 2016p 2020p 2025p 2013a 2014a 2015a 2021p 2025p
 Europe pursues the most
 The USA succeeds at
 China displays the highest continuously reducing ambitious CO2 emission
emissions among the emissions and targets targets worldwide on its
three presented regions 93g/km by 2025 way to a low-carbon
economy by 2050
 The CO2 reduction of 30%  However, this is only
between 2015 and 2020 is  The definitive 2025 targets
slightly lower than the
very ambitious will not be decided before
target the EU is aiming to
the end of 2017. However,
 No official 2025 target has achieve already by 2021
they are expected to range
been defined yet
between 68 and 78g/km
 The emission targets currently discussed in Europe for 2025 will require hybrid and other non-conventional drive-train
technologies at the expense of conventional combustion engines

Sources: European Commission, Greenpeace European Unit, IKB Research, RWTH Aachen
… and will also require Non-conventional Technology
16

Technology mix 2025 In Detail

 This low emission target will affect the

0.5%
2% automotive industry fundamentally
100% 2%
4,5%
 This includes its underlying trends
7%
22%
such as
22% 15%  vehicle and engine size
75%
46%  product mix
 engine technologies
24%
 Some forecast assume, that
conventional engines may only
50%
account for half the total engines used
by 2025
78%
71%

54% 52%
25%

0%
75g 70g (1) 70g (2) 60g

Conventional Hybrid Plug-in hybrid Battery electric Fuel cell

 The emission targets currently discussed in Europe for 2025 will require hybrid and other non-conventional drive-train
technologies at the expense of conventional combustion engines

Sources: European Commission, Greenpeace European Unit, IKB Research, RWTH Aachen
Production of Medium & Heavy Vehicles
17
In thousands

China
Europe 1,166 1,041 1,056 1,075 1,094

827 856
747
646 675

North America

545 586 581 594

471 2016 2018 2020 2022 2023
2016 2018 2020 2022 2023

Japan/ Korea
2016 2018 2020 2022 2023

Middle East / Africa 330 323 313 309 305

1 1 1 1 1
2016 2018 2020 2022 2023
2016 2018 2020 2022 2023 Southeast Asia

618 659 686 685

542
Latin America

88 105 130 140 127 2016 2018 2020 2022 2023

2016 2018 2020 2022 2023

 Stronger emission regulation in the European Union and the US induces a reduced fuel consumption
 This stimulates investments in a new generation of trucks and commercial vehicles

Source: IHS Juli 2017

Agenda
18

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
E-Mobility Forecast: Hybrids gaining importance
19

Annual PEV sales forecast, percent of total vehicle sales Comments

 Forecasts are predicting that by 2025 up to 7% of all light
10% vehicle sales will be based on hybrid technology
8%  Since a production of 105 million to 107 million light vehicles is
expected for 2025 this would mean sales of 7 million to 7.5
6%
million hybrid vehicles
4%  Therefore the share of internal combustion engines of light
2% vehicle production remains largely stable
 Other forecasts are even less optimistic regarding the sales
0% of hybrid vehicles
2017 2018 2019 2020 2021 2022 2023 2024 2025
 However sales of purely battery-powered electric vehicles
EEI / IEI Forecast should be included

Annual plug-In electric vehicle sales1)

in Mio.
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2010 2013 2016 2019 2022 2025
Actual PEV sales Barclays 2017 (Base) EEI/IEI Forecast Navigant (Base, estimated) AEO 2017

Note: PHEV = Plug-In hybrid electric vehicle; BEV = Battery electric vehicle; PEV = Plug-In electric vehicle
1) Including BEV and PHEV
Sources: Institute for Electric Innovation, Edison Electric Institute, International Energy Agency, IKB research
E-Mobility Forecast: Battery solutions reach up to 25 % market share by 2040
20

Share of electric vehicles until 2040

m of vehicles sold per year % of new car sales
140 100%
120
80%
100
80 60%
35%
60 40%
40
20%
20
0 0%
2015 2020 2025 2030 2035 2040
PHEV BEV ICE + HEV Electric vehicles % of new sales
Comments

 New research by Bloomberg suggests that additional large reductions in

battery prices can be expected
 Therefore, electric vehicles will become a more economic option than
gasoline or diesel cars in most countries during the 2020s
 Research estimates that increased electric vehicle sales will mean they
represent a quarter of cars on the road by 2040 displacing 13 million
barrels per day of crude oil but using 2,700TWh of electricity
 However, this requires significant investments in electricity generation

Note: PHEV = Plug-In hybrid electric vehicle; BEV = Battery electric vehicle; ICE = Internal combustion engine; HEV = Hybrid electric vehicle
Sources: Bloomberg, IKB Research; Picture credit: Lynk & Co 01
E-Mobility Forecast: Deployment scenarios depend on battery costs
21

Deployment scenarios for the stock of electric cars

220
Electric cars in the vehicle stock

200 IEA B2DS

180 IEA 2DS
160
Paris Decleration
140
(millions)

120 IEA RTS

100 Historic
80 Cumulative
60 country targets
40 (as of 2016)
20 Cumulative OEM
0 announcements
2010 2015 2020 2025 2030 (estimate)

Comments
 Battery cost will decline and energy density increase due to
research, development and deployment as well as mass production
prospects
 These trends will lead to a narrowing cost gap between electric
vehicles and internal combustion engines
 The evaluation of country targets, OEM announcements and
deployment scenarios for the stock of electric vehicles appear to
confirm the trend indicating a electric car stock between 9 million
and 20 million by 2020 and between 40 million and 70 million by
2025

Sources: International Energy Agency, IKB Research; Picture credits: Byton CES Concept car
Autonomous driving: The future with comfort?
22

Deployment of connected vehicles In detail

 Internet-compatible vehicles offer countless new
opportunities for OEMs and customers
 They are the basic prerequisite for autonomous driving
 Approximately 380 million connected vehicles will be on
the roads by 2021

Automation level of autonomous driving In detail

 Significant investments in autonomous driving will be
Vehicles (millions)
undertaken in the upcoming years
 In this regard Advanced Driver Assistance Systems will
have a dominant role
 Next to sensor technology, software will be a crucial factor
for the success of these systems
 However, the demand for computing power in the vehicle
will rise exponentially. Additionally, control panels will
increasingly utilize touch screens in their design

Sources: Loup Ventures, Deloitte, Business Wire, Business Insider, IKB analysis
Cobalt: Batteries drive Demand
23

Cobalt‘s End Market; Shares in % In Detail

100%  The global cobalt demand equaled 93,000 tons in 2016

 By 2020 the worldwide demand will skyrocket by around
90% 30 per cent and exceed 120,000 tons per year
80%  This is mainly driven the needs of the producers of
lithium-ion batteries for:
70%
a) Electrical vehicles
60% b) Laptops
c) Smartphones and
50%
d) PC’s
40%  Therefore, the demand from these producers will rise
from 47,000 tons in 2016 to nearly 75,000 tons in 2020
30% 62%
51%  For 2020, forecasts signal that around 75 % of all lithium
20% batteries will contain cobalt

10% 20%  In addition the demand for the production of tyres,

polyester, superalloys, tools and magnets will rise
0%  An extension of existing mining capacities
2006 2016 2020f respectively new mines are necessary
Lithium-Ion-Batteries Super Alloy
Hard Materials Ceramics and Pigments
Other

Source: Darton Commodities, Cruz Cobalt Corp., IKB Research

Lithium: Rising Importance
24

Lithium Demand 2015 – 2025; in K/MT In Detail

700
 Similar to the situation of the cobalt demand, the future
demand for lithium is driven by batteries
600
 The worldwide production of lithium equaled around
Supply 36,000 tons in 2016
500
 To fulfil the future demand an increase of the global
lithium production of up to 125,000 tons will be
400 necessary in 2025
 Around half of this volume will come from the Americas,
300 while another 40 per cent will be delivered by Oceania
 Main producers in the Americas are Argentina, Brazil
200 and in the future Bolivia
 In 2018 a balanced market is possible
100

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Carbonate Base Carbonate Battery
Hydroxide Base Hydroxide Battery
Other Inorganics Organics
Supply

Source: Lithium Year in Review 2017

Consequences for the global Foundry Demand
25

 The trend towards e-mobility has tremendous consequences for the supply chain.
Mainly the suppliers of powertrain components are negatively affected
1  If we assume the weight of an average engine block of around 50 kg and expect a
shift of 10 million light vehicles from combustion engine to e-battery-vehicles …
 … this will result in a reduction of around 500,000 tons of iron cast

 Hybrid vehicles are under the aspect of the necessary volume of casting production
for foundries a better solution:
2  They do not only need a battery but also an engine block
 The average engine block for an e-vehicle is smaller in relation to a traditional
combustion engine, but the battery leads to a higher total weight of the car

 A higher usage of copper (autonomous driving) and higher battery weight will
intensify the trend towards light-weight production:
3  This will result either in a reduction of the specific weight of a cast part (as a result
of a change in the geometry of the cast product) …
 … or in a substitution of iron cast by aluminum cast
Agenda
26

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
Global Production of Iron, Steel and Malleable Iron Cast with modest Growth
27
In million ton

China
NAFTA Western Europe Eastern Europe 39.3 40.8 41.5 41.0 40.5
37.0 39.3

11.713.5 8.9 9.5 9.9 9.9 9.9 9.1 8.9 8.6 9.1 9.0 8.7 8.4 7.7 7.7 6.9 7.4 7.5 7.5 7.6
2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

2025
2022
2020 Other Asia
Rest of world
2018 15.5 16.3 16.9 17.0 17.2 17.0 16.8
2016 3.0 2.8 2.2 2.3 2.4 2.4 2.4
2012 2014 2016 2018 2020 2022 2025

2014 2012 2014 2016 2018 2020 2022 2025

2012

 Production in Western Europe will move sideways until 2025 with a slight decline from 2020 on
 Despite the partly re-industrialization of the US economy and low energy costs declines the foundry production in the
NAFTA declined. Development will level off from 2020 onwards. Growth primarily will take place in Mexico
 China will dominate the world market but India will catch up. Japan and Korea will lose cast production to these countries

Sources: World Census, CAEF, IKB forecast

Iron, Steel and Malleable Iron Cast recover in Eastern Europe
28
In million tons

Other

1.3 1.2 1.2 1.2 1.2 1.1 1.1

2012 2014 2016 2018 2020 2022 2025
Germany Eastern Europe
7.7 7.7 6.9 7.4 7.5 7.5 7.6
4.3 4.1 3.9 4.2 4.2 4.1 4.0

2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

France
2025
1.4 1.4 1.3 1.3 1.3 1.2 1.2 2022
2012 2014 2016 2018 2020 2022 2025

2020
Italy 2018
Spain
2016
1.1 1.2 1.2 1.2 1.2 1.1 1.1
1.0 1.0 1.1 1.2 1.3 1.3 1.2 2012 2014 2016 2018 2020 2022 2025
2014
2012
2012 2014 2016 2018 2020 2022 2025

 In Eastern Europe a large part of growth will take place in Turkey but we also expect a recovery after sharp declines
in Russia and Ukraine
 Western European production shows a tendency towards declining volumes. Spain could show stronger growth
 We see chances for Germany in case of a stronger recovery of mechanical engineering activities

Sources: World Census, CAEF, IKB forecast

Iron, Steel and Malleable Iron Cast in Asia: India with high Growth Potential
29
In million tons

South Korea
1.9 2.0 1.9 2.0 2.0 2.0 1.9
Other Asia 2012 2014 2016 2018 2020 2022 2025

Japan
0.4 0.4 0.4 0.4 0.4 0.4 0.4 3.8 4.0 3.7 3.7 3.6 3.5 3.4
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

China
37.0 39.3 39.3 40.8 41.5 41.0 40.5
2025
2012 2014 2016 2018 2020 2022 2025 2022
2020
2018
India 2016
8.5 8.9 10.1 10.1 10.4 10.4 10.3
Republic of China (Taiwan) 2014
2012 2014 2016 2018 2020 2022 2025

2012
0.9 0.9 0.8 0.8 0.8 0.8 0.8
2012 2014 2016 2018 2020 2022 2025

 The Indian foundry industry has a high growth potential: the infrastructure has a high investment backlog in relation to
China and a higher car production induces a rising demand for foundry products
 The loses of car manufacturing in South Korea and Japan to Chinese car production plants result in a declining iron
cast output, which could not be compensated by other customer segments
 From 2020 on the increasing importance of electrical vehicles will reduce the casting output in China

Sources: World Census, CAEF, IKB forecast

Global Aluminum Cast Production strengthens
30
In million tons

China
NAFTA Western Europe Eastern Europe
6.9 7.2 7.3 7.4 7.5
5.9
2.6 2.5 2.7 2.8 2.9 3.1 3.2 3.0 3.1 3.2 4.5
2.3 2.5 2.7 2.9 2.2
1.5 1.7 1.8 1.9 2.0 2.0
2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

2025
2022
2020 Other Asia
2018 Rest of world
2016 3.2 3.6 3.6 3.7 3.7 3.8 3.8
0.2 0.2 0.2 0.2 0.2 0.2 0.2
2014 2012 2014 2016 2018 2020 2022 2025

2012 2012 2014 2016 2018 2020 2022 2025

 Germany will gain market share in Europe at the expense of Western European competitors. We expect a recovery process
in Eastern Europe (Russia, Ukraine) and a catching-up process in Turkey
 The majority of growth in the NAFTA region is fueled by investments of foreign OEMs and global foundry groups
 Korea and Japan will lose market shares to China. China surpassed the 6 million tons production milestone for the first
time in 2015
Sources: World Census, CAEF, IKB forecast
European Aluminum Cast Production shows stronger Growth
31
In million tons

Eastern Europe
1.8 1.9 2.0 2.0 2.2
Other 1.5 1.7

0.3 0.3 0.4 0.4 0.4 0.4 0.4 2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

Germany
1.2 1.3 1.3 1.4
0.8 1.0 1.1

2012 2014 2016 2018 2020 2022 2025

2025
France
2022
0.3 0.3 0.3 0.3 0.3 0.4 0.4 2020
Italy
Spain
2012 2014 2016 2018 2020 2022 2025

2018
0.7 0.7 0.8 0.8 0.9 0.9 0.9 2016
0.1 0.1 0.1 0.2 0.2 0.2 0.2 2014
2012 2014 2016 2018 2020 2022 2025
2012 2014 2016 2018 2020 2022 2025

2012

 For Eastern Europe we see a steady recovery within the next years (e.g. Russia, Ukraine)
 In the medium-term an expansion of aluminum rim production in Turkey as well as increased capacities in Slovakia, the
Czech Republic and other countries will stimulate European production
 After strong growth in the past years German aluminum foundries are expected to produce 1.2 million tons from 2018 on
Sources: World Census, CAEF, IKB forecast
Asian Aluminum Cast Production on further Growth Path
32
In million tons

South Korea
0.5 0.6 0.6 0.6 0.6 0.6 0.6
Other Asia 2012 2014 2016 2018 2020 2022 2025

Japan
0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.4 1.4 1.4 1.4 1.4 1.4 1.4
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

China
6.9 7.2 7.3 7.4 7.5
5.9
4.5

2012 2014 2016 2018 2020 2022 2025

2025
2022
India 2020
0.9 1.1 1.2 1.3 1.4 1.4 1.4 2018
Republic of China (Taiwan) 2016
2012 2014 2016 2018 2020 2022 2025

0.3 0.3 0.3 0.4 0.4 0.4 0.4 2014

2012 2014 2016 2018 2020 2022 2025

2012

 The Chinese aluminum cast production shows a continuously strong growth. Main driver is the demand from the car
manufacturing industry. In addition we see a substitution of iron cast by aluminum foundry parts in the mechanical
engineering industry
 India will catch up, but starting from a relatively low level
 The production level in Japan and South Korea will remain relatively constant
Sources: World Census, CAEF, IKB forecast
Global Copper Casting Production with slight Increase
33
In thousand
tons

NAFTA China
Western Europe Eastern Europe
750 750 800 800 810 810 810
511 477
437 467 489 489 489
207 197 214 214 218 218 218 137 144 197 198 176 161 151
2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025 2012 2014 2016 2018 2020 2022 2025

2025
2022
2020
2018
2016 Other Asia
Rest of world
2013
2012 29 32 29 29 32 32 32 161 182 175 182 178 176 176
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

 The global copper die casting production increased by 8.2% from 2010 to 2015
 By 2025 we expect global copper die casting production to rise to c. 1.9 million tons
 While copper die casting production will only slightly recover in Western Europe and North America the Chinese market
share will grow. More than half of the global copper die casting production will take place in Asia
Sources: World Census, CAEF, IKB forecast
European Copper Casting Production with only slow Growth
34
In thousand tons

Eastern Europe
197 198 176
137 144 161 151
Other
38 36 37 37 37 37 37
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

Germany
77 69 78 78 80 80 80
2012 2014 2016 2018 2020 2022 2025

France 2025
18 18 18 18 18 18 18 2022
2012 2014 2016 2018 2020 2022 2025

2020
Italy 2018
Spain
63 63 66 66 68 68 68 2016
12 12 15 15 16 16 16 2013
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

2012

 After the copper die casting production in Western Europe declined between 2010 and 2015, we expect a slight revival of
production by 2025. Highest growth should be observed in Italy, Germany and France
 In 2020 a decrease could have happen in Eastern Europe. We expect a slight improvement in the upcoming years. Copper
die cast production in Turkey could increase slightly
Sources: World Census, CAEF, IKB prognosis
Asian Copper Casting Production with Stabilization
35
In thousand tons

South Korea
26 26 26 28 28 26 26
Other Asia 2012 2014 2016 2018 2020 2022 2025

Japan
15 36 39 39 39 40 39 80 77 77 75 75 75
78
2012 2014 2016 2018 2020 2022 2025

2012 2014 2016 2018 2020 2022 2025

China
750 750 800 800 810 810 810

2025 2012 2014 2016 2018 2020 2022 2025

2022
2020
2018
2016
Republic of China (Taiwan)
2013
40 42 33 37 36 36 36
2012
2012 2014 2016 2018 2020 2022 2025

 The Chinese copper die casting industry will profit from further infrastructure investments, but we see only a stabilization
of the current demand, not a significant growth
 The Japanese copper cast production will get impulses from the power engineering industry (export driven)
 In the other Asian countries we forecast a similar development
Sources: World Census, CAEF, IKB forecast
Trend towards finished castings
36

 OEMs wish to not having to touch components anymore

 They favor to install them at the assembly line directly
1  Furthermore, OEMs aim at reducing the number of suppliers …
 … resulting in significant reduction of logistic costs

 Complete post-processing of castings has increased in recent years at many

large as well as medium-sized foundries

2  This has led to investments in new processing centers

 Additionally investments in surface treatment or heat treatment have been
undertaken

 Cooperation with post-processing specialists turned out to be an alternative to

own investments

3  Partially such a cooperation takes place directly at plant premises or in close

vicinity

 But: Product liability remains with the foundry

Strategic challenges of foundries
37

 Emerging markets will account for the majority of demand growth

Globalization  The automotive industry in particular demands local production outside of Europe
 Increased requirement of a global presence close to the customer will raise logistics costs

 Preservation of technology leadership is of high importance, especially for the foundry industry
Technological
 Pressure on weight reduction will continue (e.g. in automotive and machine construction)
challenges
 The E-Mobility discussion will significantly change the supply chain, especially in powertrain

Retaining  Many qualified employees will retire in the upcoming years (primarily in Western Europe)
qualified  Competition for qualified personnel intensifies due to changing demographics
personnel  Need for new employee retention programs (e.g. balance between work and family) and training

 Trend towards delivery of completely processed castings will demand corresponding investment
Investment
 Increased complexity of metal alloy also will demand investment
requirements
 High cost of energy will have to be managed

 International competition in vehicle construction will go up

Margin
 This limits the possibility of cost transfer to the end customer
pressure
 OEMs could pass on cost pressure to suppliers

 Continuation of industry consolidation is expected

Industry
 Main reasons are globalization pressure and increased investment requirements
consolidation
 Many family businesses face problems in terms of company succession from our point of view

 The global foundry industry is facing increased investment requirements. In combination with technological changes this
should intensify industry consolidation
Agenda
38

1 The macro-economic Environment 3

2 Trends in major Customer Markets 10

3 E-Mobility: A Risk for the global Foundry Industry? 21

4 Future Development of global Foundry Markets 25

5 Appendix 31
Your Contact
39

Dr. Heinz-Jürgen Büchner

Managing Director, Industrials & Automotive
IKB Deutsche Industriebank AG
Eschersheimer Landstraße 121
60322 Frankfurt am Main

Phone: +49 69 79599-9602

Fax: +49 69 79599-8602
Mobile: +49 171 2249517
E-Mail: Heinz-Juergen.Buechner@ikb.de
Disclaimer
40

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Contact at IKB Deutsche Industriebank AG

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Tel.: +49 211 8221-0

Dr. Heinz-Jürgen Büchner

Managing Director Industrials, Automotive & Services
Tel.: +49 69 79599-9602

15.05.2018

Published by: IKB Deutsche Industriebank AG, Wilhelm-Bötzkes-Straße 1, 40474 Düsseldorf

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