Stabilising the supply chain - ArcelorMittal South Africa

ArcelorMittal South Africa
Stabilising operations
Dr. Hans Ludwig Rosenstock, COO 31 May 2013

Disclaimer
Forward-Looking Statements
This presentation may contain forward-looking information and statements about
ArcelorMittal South Africa and its subsidiaries. These statements include financial
projections and estimates and their underlying assumptions, statements regarding plans,
objectives and expectations with respect to future operations, products and services, and
statements regarding future performance. Forward-looking statements may be identified by
the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although
ArcelorMittal South Africa’s management believes that the expectations reflected in such
forward-looking statements are reasonable, investors and holders of ArcelorMittal South
Africa’s securities are cautioned that forward-looking information and statements are
subject to numerous risks and uncertainties, many of which are difficult to predict and
generally beyond the control of ArcelorMittal South Africa, that could cause actual results
and developments to differ materially and adversely from those expressed in, or implied or
projected by, the forward-looking information and statements. These risks and uncertainties
include those discussed or identified in the filings with the JSE made or to be made by
ArcelorMittal South Africa, including ArcelorMittal South Africa’s Annual Report for the year
ended December 31, 2012 filed with the JSE. These forward looking statements have not
been reviewed and reported on by ArcelorMittal South Africa’s auditors and apply only as of
the date they are made. ArcelorMittal South Africa undertakes no obligation to publicly
update its forward-looking statements, whether as a result of new information, future events,
or otherwise.
1

Agenda
• Stabilize operations
• Asset reliability
• Quality improvements
• Energy savings
• Other cost reduction initiatives
2

Management systems implemented to
stabilise operations
• Decision in 2010 to stabilize and improve operations by introducing management
systems
Vanderbijlpark,
Vereeniging,
Newcastle
Business
Improvement
Saldanha
World Class
Manufacturing
• Systematic approach to deal with
business matters, divided into work
streams along defined problem
solving technology
• Work streams are setup and working
among others in maintenance,
energy saving, product development
• 10 pillar program including safety,
cost deployment, autonomous and
professional maintenance, people
development, environment and
operational excellence
• Holistic approach for business
improvement
Stabilize
operations
using
Mgt
Systems
3

Op Standardisation
Maintenance
Quality
Outsource
Energy
Vanderbijlpark Works master plan
AREA
Complete SOP audits &
Visual Management
Management Routines
Management of Abnormalities
CMN (Full ARP implementation)
CMS (Full ARP implementation)
Roll & Shear (Full ARP implementation)
Hot Rolling (Selected roll-out)
Coke Making (M&B Analysis only)
Iron Making (Phased in full roll-out)
Steel Making (Planning & Scheduling)
Slab quality
Coil quality 6-σ black spots
Plate Quality
Caster segments
Refractories
Lubrication systems
Work roll mill bearings maintenance
Energy awareness
Plant energy audits
Plant benchmarking gap analysis
Best practice implementation
2013 2014
Q1 Q2 Q3 Q4 Q1 Q2
• Detailed work plan
• Best practise
implementation
• Leveraging from
ArcelorMittal Group
expertise
• Large Group internal
data base of
information
• Access to world class
R&D
1 – FTE: BI / Plant FTEs for team for 2013;
2 – P=Production/Productivity, Q=Quality, C=Cost, D=Delivery, S=Safety, M=Management, E=Environment
SOURCE: BI Team
4

World Class Manufacturing (WCM)
overview
• Started program in 2010 with 5 WCM pillars
and 5S
• Focus on autonomous maintenance to
deliver improvement in reliability shifted
from achieving high reliability to focused
improvement to deliver the savings
Savings achieved by Dec 2012 (from baseline H1 2010)
Target
17.0
6.3
7.7
15.9
5.2
9.4
17.5 17.3
Actual
2.1 2.2
FI
Footprint
FI Energy
FI other
AM & PM
PD
• The program currently supported by teams:
– 40 safety project teams; 28 autonomous
maintenance teams; 15 professional maintenance
teams; 20 focussed improvement teams
– Annual cost deployment to prioritise/focus efforts
5

Maintenance systems
Breakdown
maintenance
• Equipment is repaired
after a failure in
operation
• advantage: Life time of
the equipment is fully
utilized
• problem: repair not
planned, capital
intensive (spares) &
longer stops
Life cycle maintenance
• Repair is performed in
fixed intervals,
depending of the
estimated life cycle of
equipment
• advantage: planned
repair stops, stable
operations
• problem: life time of
equipment is not always
fully utilized
Condition based
maintenance
• Repair is performed
according the actual
equipment status
• advantage: planned repair
stops, stable operations,
life time of equipment
utilized to maximum,
minimum spares
• precondition: highly skilled
and reliable workforce
required, good, adequate
data base for support
required
6

Vanderbijlpark reliability initiatives:
Hot rolling mill
Dec-12
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Target 2012
Avg 2012
Avg 2011
Avg 2010
Avg 2009
2011
2012
Benchmark
YTD 2013
Jan-13
Feb-13
Mar-13
Apr-13
Hot strip mill and plate mill reliability plan
• Short loop to tackle the shorter delays
– Positive outcome employees focus on the wider
problem rather than only on the obvious problem
– Action must ensure that delays are not repeated
• Root cause analysis (RCA)
– From 2011 onwards HSM RCA’s conducted on delays
longer than 90min (previously 120min)
– Identify root cause and eliminate the problem
• The asset reliability program include:
– Preventative replacement of equipment
– Upgrading of equipment
– Back to basic conditions on equipment
• Execution of job cards
Hot strip mill quality plan
• Training of young engineers - overseas experts
• Develop proactive tools stabilise performance
– Develop trends, model performances indicators etc.
– Process standardization
• Process yield focus areas
– Focus on mechanical yield (cobbles and plate shears)
• Roughing mill reliability program
• Curl at roughing mill
– Coil appearance
– Shape and profile
– Pinchers on tail ends
40
30
20
10
0
99.5
99.0
99.0
98.6
98.5
98.0
97.5 97.3
0.0
Unplanned downtime Yield (%)
99.2
98.8 98.8
98.4
98.0
7

Vanderbijlpark reliability initiatives:
Blast furnace area
Key drivers for blast furnace optimization
• Blast furnace C hearth wall and tuyere belt
replaced
• Blast furnace D tapholes repaired with
design improvements
• Modifications done to blast furnace D
through design
• Operational stability, improved availability
85
VDB blast furnace C
Zero Wind Equivalent Availability
(% of operating time)
53
76
89
92
Ongoing efforts
• Continue with extensive operator training
• Roll-out of asset reliability program to
improve maintenance approach
• “Back-to-basics” on tapping equipment
• Raw material quality focus
2008 2009 2010
2011 2012
Improvements exhibited
8

Vanderbijlpark reliability initiatives:
Strip processing lines
• Significant improvements made in unplanned stoppage rates
18.9
Galvanizing line
(hours between stoppages)
20.8
17.6
Pickling line
(hours between stoppages)
1.89
2.27
14.6
1.24
1.29
2011
2012
2013 YTD
Target
2011 2012 2013 YTD Target
• Mean time between failure describes the time in hours between two unplanned
stops of a processing line
9

Maintenance spend is sufficient
• Maintenance capex plus repairs and maintenance are and will remain
sufficient to sustain our competitive position
• Decreased expenditure in 2009 due to global financial crisis otherwise
overall incremental spend increase each year
Maintenance spent on both capex and opex per tonne of steel shipped ($/t)
82
22
86
17
76
8
+25.6%
99
21
108
18
100 103
13 21
Capex
Opex
60
69
68
78
90
87
82
2007
2008
2009
2010
2011 2012 2013F
10

Quality improvements - Vanderbijlpark
• Ongoing quality improvement
efforts
• Customer complaint ratio of 1.08%
of total sales revenue in 2012
• Significant reduction achieved
• 2013 YTD at 0.52%
• 2012 scrapped tons (i.e. scrap &
secondary grade) was 2,500t
• 26% lower than the seven
year peak of 3,400t in 2011
• 2012 cost of quality R66m:
• 30% below 2011
• 35% below 2010
• Tin and HRC receive the majority
of complaints
Vanderbijlpark Works
(quality claims by volume for flat steel products)
11

Quality improvements – Saldanha works
• Customer complaint ratio of 0.102%
of total sales revenue in 2012
• 2013 YTD rate of 0.058%
• Scrapped tons (ie scrap &
secondary grade) in 2012 was
6,510t
• 51% lower than 2011 peak of
13,308t
• Surface defects make out 90% of
claims with shape the balance
• Cost of quality in 2012 was R16m
• 16% below the 2011 result
• 31% lower than the 2010
Prime ratio
99.5
99.1%
99.0
98.5
98.0 97.8%
98.6%
97.5
97.6%
97.0
96.7%
96.5
2008 2009 2010 2011 2012
3.0
Rejections based on quality
2.6%
2.5
2.0
1.7%
1.5
1.6%
1.2%
1.0
0.6%
0.5
2008 2009 2010 2011 2012
12

Yield improvements - Newcastle
• In 2012 the bar mill was responsible for 56% of the relevant complaints by volume
and the rod mill for 44%
• 2013 YTD medium mill yield against target at 94%
• 2013 YTD cobble rate of 1.3% at bar mill
Newcastle medium mill – yield % Newcastle bar mill – cobble rate %
93.8%
93.6%
93.8%
1.60%
1.55%
1.56%
1.55%
93.4%
93.4%
1.50%
93.2%
93.0%
92.8%
93.2%
1.45%
1.40%
1.35%
1.30%
1.28%
92.6% 92.5%
1.25%
1.24%
0.0%
0.00%
2010
2011
2012
2013 YTD
2010
2011
2012
2013 YTD
13

Energy – fuel rates Vanderbijlpark
Key drivers for the blast furnace
optimization at Vanderbijlpark
• Charging of DRI
• Improve stability
• Fine sinter charging
• Thabazimbi lump on mixing bed
• Eliminate blast furnace D
charging delays (on-going)
• Full operation of Stove 4 to improve
hot blast temperature in June
Ongoing efforts
• Operator refresher training
• Improved maintenance approach
• Implementation of autonomous
maintenance
• Focussing on raw material quality
580
560
540
520
0
580
560
540
520
565
2008 2009
561
VDB blast furnace C - Total fuel rate
(coke equivalent) Kg/tHM
565
498
560
565
526 529
2010 2011 2012 Jan- Feb- Mar-
13 13 13
VDB blast furnace D - Total fuel rate
(coke equivalent) Kg/tHM
560
516
562
529
504
528
2013
YTD
0
2008
2009
2010
2011
2012
14

Energy – electricity Saldanha works
2012 projects (total savings R127m)
• Technology
• Variable speed drives, waste heat
utilisation to replace diesel heater, lighting
replacement
• Operational efficiency
• RHF, WTP pump system & LPG savings
• Eskom tariff structure (winter peak tariff) -
utilise chemical energy
• ISO 50001 and improved reporting by
empowering area managers to set targets and
manage their energy consumption
Saldanha works electricity consumption
Kwh/t HRC
1.31
1.51
1.31
1.27
1.19
2011 projects (total savings R64m)
• Switch off what is not required in low
production periods
• Compressed air- repair leaks / prevent misuse
2008 2009 2010 2011 2012
Electricity consumption Kwh/t HRC
15

Energy – LPG Saldanha works
• Reduce LPG consumption by 30% by changing operating philosophy
• Use process gas for furnace reheating
• Reduce temperature losses by stabilizing the operations
Saldanha works LPG consumption
36
24
18,303
23
20,625
28
18,811
25
22,112
17
13,072
25,000
20,000
15,000
12
12
10,000
5,000
0
2008
2009
2010 2011 2012
0
LPG consumption 1000Kg
LPG consumption Kg/t HRC
16

Energy – Newcastle
• Process review for reheating
furnaces
• Improvement of measurement
technology
• Training of operators
• Stabilizing of operations
Newcastle medium mill gas consumption GJ/ton
2.76
2.30
1.78
2011 2012 2013 YTD
Newcastle bar mill gas consumption GJ/ton
1.28
1.19
1.08
2011 2012
2013 YTD
Newcastle rod mill gas consumption GJ/ton
1.25
1.23
1.21
2011 2012
2013 YTD
17

Asset optimisation at Vanderbijlpark
• Closure of electric arc furnace
– Vanderbijlpark has sufficient capacity to meet domestic and
AOL demand
– Allows the full utilization of the BF route
• Closure of caster 3
– Improve productivity of casters V1 and V2
• Closure of coke oven battery 3
– Reduced blast furnace consumption
– Import coke for Saldanha steel is more cost effective
– poor technical status of battery 3 required stop of production
• Improve productivity in cold rolling mills
– Run pickling line / cold rolling north at full capacity
– Restructure shift pattern in cold rolling south
19

Key messages
• Comprehensive cost savings
• Operational performance enhanced with new management
systems implemented
• Focus on improving asset reliability
• Our assets will continue to receive adequate repair and
maintenance to ensure our reliability
• Quality is focus area and we are showing positive results
• Asset optimization leading to improved utilization rates
• Energy efficiencies improved by reduced fuel rates, lower
electricity and gas consumption
Zero fatalities with record LTIFRs
20

Thank you
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