Partnership within supply chain

COORDINATING PROCESSES, BOOSTING VALUE ADDED.

OTTO FUCHS is dependent on the availability of raw materials for production purposes and of consumables and supplies all over the world. As manufacturing companies, the Group companies are involved in complex, global, and closely interconnected value chains. OTTO FUCHS is both a buyer of raw materials, consumables, and supplies, and a development partner, producer, and supplier to customers around the world.

We seek to manage our interfaces both internally and with our partners all along the value chain in an economical and resource-conserving way. Joint planning processes, project work based on partnerships, and the comprehensive exchange of information make it possible to achieve a high degree of process efficiency. Additionally, our integrated approach to supplier management facilitates a closed aluminum cycle and improved recycling opportunities.

To make the most of the opportunities that present themselves along our value chains and to minimize our risks, we focus on having a diversified pool of suppliers and seek to establish reliable relations based on partnership with the companies that we work with. In addition to economic and quality criteria, we consider environmental, social, and governance standards to be relevant when selecting new suppliers and assessing our existing partnerships. The Supplier Code of Conduct, which is also an integral part of the General Terms and Conditions of Purchase, serves as an important basis for the business relations between OTTO FUCHS and our company’s suppliers. This code obliges the suppliers to observe globally accepted human rights, labor and social standards, and anti-corruption rules, and to treat resources and the environment responsibly.

Projects and Measures

STRATEGIC METAL PURCHASING
The majority of the OTTO FUCHS sites need metals and metal alloys for their production processes. We are continuously further developing the various materials so as to be able to provide our customers with first-class products and solutions in the future, too. We produce aluminum, magnesium, and copper alloys in our own foundries. We source the metals we use from around 30 key suppliers located around the world. OTTO FUCHS purchased a total of approximately 143,000 tons of metal for its production in 2020. The primary metals purchased included aluminum, titanium, nickel, magnesium, copper, and zinc, and alloys of all of these.

Strategic metal purchasing is handled centrally at our headquarters in Meinerzhagen, while the individual sites manage operational procurement at the local level. Among other things, the suppliers can download our General Terms and Conditions of Purchase, the Work Safety and Environment Protection Guidelines, our Quality Assurance Requirements, and our Supplier Code of Conduct from OTTO FUCHS’s publicly accessible supplier portal.

The ESG standards mentioned in our Supplier Code of Conduct include all the important sustainability aspects. With this code, we oblige our suppliers among other things to use all resources responsibly, give precedence to renewable energies, recycle the materials used, and minimize or entirely avoid any impact on the environment. The code also requires our suppliers to oblige their own suppliers to comply with the rules of conduct.

We have additionally stipulated the minimum management system requirements we make of our suppliers in our Quality Assurance Requirements (QAR). The regular quality management audits which the suppliers undergo also cover aspects like environmental protection, energy, and occupational safety.

DIRECT SUPPLIES OF MOLTEN ALUMINUM
The efficient use of resources is an issue of great importance not only to OTTO FUCHS, but also to our suppliers. Our business relations with our supplier TRIMET Aluminium SE are testimony to how well synergies can be used based on close partnership and optimally coordinated processes within the value chain. This family-owned enterprise based in Essen has been an important business partner for OTTO FUCHS for more than 30 years.

With the aluminum smelter in Essen and our plant in Meinerzhagen being so close to one another, we are also able to source molten metal for our foundry. There are a number of advantages to being directly supplied with molten aluminum: The metal need not be melted down again in Meinerzhagen, meaning less time is needed for the finishing processes. There is also less metal-melting loss – something which tends to occur when aluminum ingots are melted down again. But more than anything else, our use of molten aluminum plays a part in reducing our energy needs. Deliveries of molten aluminum rather than ingots result in savings of around 0.5 megawatt-

hours per ton. The volume of liquid aluminum purchased in 2020 was only around 320 tonnes due to the Corona pandemic. With an annual purchase volume of 3,000 tonnes of liquid aluminum as a rule, we are thus reducing our energy consumption at the Meinerzhagen site by 1,500 megawatt hours. In addition, we can use surplus energy for our own scrap recycling processes, as the molten aluminum arrives at our foundry at a higher temperature than is needed for the casting process.

ALUMINUM RECYCLING AND USE OF SECONDARY ALUMINUM
Recycling is becoming increasingly important in view of our high aspirations of achieving process and resource efficiency at our sites. We focus here in particular on aluminum as one of our primary raw materials. This metal boasts very good recycling properties and can be melted down again without any loss of quality. This is especially attractive from an energy perspective: it takes just 5 percent of the energy originally used to produce secondary aluminum in the recycling process. Feeding the metal back into the cycle thus not only makes economic sense – it also has a positive impact on our energy and carbon footprints.

Around 88 percent of the aluminum and aluminum alloys used in our foundry come from recycled materials from within the internal production process. This increase is also a result of the Corona pandemic. These are primarily forging scrap and flash (see diagram "Aluminum Value Chain"). The recyclable materials are melted back down in the foundry, cast as billets, and reused for manufacturing. Within OTTO FUCHS,  secondary aluminum already accounts for 72 percent of the aluminum we process.

We are currently expanding our foundry in Meinerzhagen to be able to feed an even greater proportion of recyclable materials back into the internal cycle in the future, to be melted down again. This will increase our capacities by 20,000 tons per annum.

We have aluminum and aluminum alloys which we are unable to melt down and process for reuse at our sites melted down and reworked by external partner companies. They then return the volumes we supply them with in the form of billets, which are fed back into our manufacturing process. We rework all revert scrap brass in our own foundry. In comparison, the process of reworking titanium and nickel alloys is a lot more complex. OTTO FUCHS has been working with certified specialist companies in this area for a number of years. These companies process the revert scrap in full and feed much of it back into the production process for the manufacture of titanium and nickel formats. What’s left over is used as a master alloy in the steel industry.

Recycling Strategy

Basically, the circular economy is one of the most important topics of the future for climate protection and sustainability as a whole. We are active in the field of component production and supply aerospace and automotive manufacturers in particular. Among other things, we produce geometrically sophisticated forged parts from particularly high-quality and pure alloys. The materials used are 100 percent recyclable and therefore offer the best possibilities for remelting at the end of a life cycle. Despite this already very advantageous position, we are working relentlessly to identify further potential and seize opportunities. Dialogue and cooperative research with our business partners are at the heart of our strategy. We are working with customers, suppliers and with initiatives and foundations to further develop opportunities to increase the post-consumer scrap content of our products. These activities represent part of the building blocks we are pursuing to realize our goal of a comprehensive recycling strategy by 2025.