Good morning, ladies and gentlemen, and welcome to the Tronox Holdings Q4 2023 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Jennifer Guenther, Chief Sustainability Officer and Head of Investor Relations. Please go ahead.

Thank you, and welcome to our fourth quarter and full year 2023 conference call and webcast. Turning to slide 2. On our call today are John Romano and Jean-Francois Turgeon, Co-Chief Executive Officers; and John Srivisal, Senior Vice President and Chief Financial Officer. We will be using slides as we move through today's call. You can access the presentation on our website at investor.tronox.com. Moving to slide 3. A friendly reminder that, comments made on this call and the information provided in our presentation and on our website, include certain statements that are forward-looking and subject to various risks and uncertainties, including, but not limited to, the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and certainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. It is now my pleasure to turn the call over to John Romano. John?

Thanks, Jennifer, and good morning, everyone. We'll begin this morning on slide 5 with some key messages from the quarter. We delivered fourth quarter top line performance in line with expectations. TiO2 sales volume declined approximately 4% in the quarter compared to the third quarter. Volumes were slightly lower than expected due to more seasonality in North America than anticipated, and we also experienced some shipment delays as a result of congestion in the Red Sea that delayed some stock transfers to cover our Botlek outage in Europe. Our TiO2 pricing was only down 1% compared to the third quarter, which was better than our previous guide. Our zircon volumes increased 82% versus the third quarter, higher than expected and communicated on our last earnings call. However, we did experience some unfavorable product and regional mix, which negatively impacted our marginal quarter. Zircon pricing was down 9% compared to the third quarter, due to product mix and some regional pricing adjustments, primarily in Asia Pacific. Revenue was also higher from other products due to additional sales of pig iron, as well as opportunistic sales of ilmenite and a portion of our rare earths tailing deposit in South Africa, which is a key part of our funding strategy for our rare earths business. Our adjusted EBITDA for the fourth quarter came in $11 million below our guided range. This was primarily driven by a delayed restart of our steam supplier at Botlek and higher costs from unanticipated downtime stemming from running at lower rates, while the Botlek situation is now under control, and our suppliers back up and running, we saw approximately $10 million more in cost than forecasted, due to the longer downtime. Importantly, our supplier outage did not disrupt our ability to fulfill customer demand as we were able…

Thank you, John. Turning to slide 7. Revenue of $686 million increased 6% compared to the prior year, primarily from TiO2 and other product sales. This represented an increase of 4% relative to the prior quarter due to higher zircon and other product sales. Income from operations was $8 million in the quarter. We reported a net loss of $56 million. Our effective tax rate in the quarter was 75%. Despite generating a loss before income taxes, we paid $24 million in taxes in the quarter as the majority of our taxes are paid in South Africa where we had higher earnings than expected owing to higher Zircon sales in the sale of a portion of our rare earth tailing deposit. In the majority of our other jurisdictions, we either realized a net loss or FNOL positions. As a result, our adjusted diluted earnings per share was a loss of $0.38. As previously discussed, our adjusted EBITDA in the quarter was $94 million and our adjusted EBITDA margin was 13.7%. Free cash flow generated in the quarter was $51 million. Now let's move to slide 8 for a review of our commercial performance. TiO2 revenues increased 9% versus the year ago quarter driven by a 16% increase in sales volume, a 6% decrease in average selling prices and unfavorable product mix impact of 2%. We saw a favorable impact from FX of 1%. Zircon volumes decreased 26% compared to the year ago quarter and zircon pricing was lower by 11%. Revenue from other products was $110 million an increase of 38% compared to the prior year driven by higher sales of pig iron, ilmenite and rare earth tailings that John previously mentioned. Turning to slide 9. I will now review our operating performance for the quarter. Our adjusted EBITDA of…

Thanks John. We expect 2024 to see a reversal of several of the trends for the last 18 months on the market. We've already begun to see a pickup in demand for TiO2 that is more positive than we would see normally at this time of year. January sales were strong and we're seeing continued strengthening in the market for February and March order books. We expect TiO2 pricing to reverse its downward trend and improve as we move through 2024. Zircon volumes are also continuing to improve from the trough levels realized in July of 2023. The magnitude of the recovery will be somewhat dependent on China as it makes up 50% of the total zircon market. However, even without that significant shift in China we're seeing demand recover. On the operational side as I've mentioned previously, we incurred significant costs in 2023 from running our assets at low utilization rates due to soft market demand. We incurred between $25 million and $35 million in fixed cost absorption headwinds in each quarter of last year. In 2024, we're already beginning to increase our operating rates in line with demand, which will have a positive impact on our manufacturing cost. We still have high-cost inventory to move through the business, which we anticipate will carry partially into the second quarter. But by the second half of the year, we should see margins revert to our more normalized levels. We continue to deploy technology at our sites to reduce costs and improve efficiencies, which will also improve our cost position as we ramp up. We are investing in key capital projects to sustain our vertical integration as well. From a growth perspective, R&D efforts remain focused on product and process innovation to enhance profitability. Additionally, we're continuing to explore opportunities in…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from John McNulty with BMO Capital Markets. Please go ahead.

Yes. Good morning. Thanks for taking my question. So I guess the first one would just be -- you've got a relatively positive outlook on the volume front of TiO2, as we look to the first quarter, is there any geographic deviation in terms of where you're seeing kind of that outsized or above normal demand? Or is it relatively broad? How should we think about that?

Yes. Thanks for the question. So look in the first quarter it's relatively broad. We're seeing it across all the sectors. We mentioned that we didn't -- we saw a little bit more seasonality in the fourth quarter in the North American market, and we're starting to see the North American market pick up a bit more. So that increase in Q1 sales normally Q1 and Q4 would typically be pretty similar. So I really do believe that based on what we're seeing in the field from our customers we're confidently -- we're confident that the destocking has largely run its course, and we're seeing customers restocking and moving into more normal buying patterns. I think additionally, historically, our business has kind of led in and out of economic transitions, and we really do believe we're on the front end of a recovery, and this is having a I'd say, a more positive impact on our outlook for the entire year.

Got it. Okay. Fair enough. And then maybe just speaking to the fixed cost absorption this year. You highlighted in one of the slides a $25 million to $35 million per quarter hit. So I mean, we're talking like $100 million $150 million for the year, which is pretty chunky. I guess, is there a way to think about what volume levels you need or where we -- what we need to see in 2024 to completely erase that? Or like is there kind of a rule of thumb that we should be thinking about as that kind of fixed cost absorption headwind dies down?

That's a great question. I'll start and John maybe you can add on to it. So historically wind the clock back four quarters, we were I think 18 months in a row consistently above 20% EBITDA margins. And we quoted something just below 14%. So running at the rates that we've been running at which, again, we made the point that it's lower than what we've ever historically run, we believe that where we're ramping up right now, and we're not at full capacity. We're ramping up the assets that as we move through the first quarter we'll start to get to volumes. And I'd say, capacity utilization, which should get us back to, I would say, mid to normal run rates on EBITDA margin, but we also have to think about the inventory that we've got to work through. So I made the reference on the call that we've got inventory on the balance sheet. We're going to have to work through that. It's probably going to work its way probably halfway through the second quarter. But when we get in the second half of the year you should start to think about those normal low to mid-20 kind of run rates on EBITDA margin. And that's without a lot of movement on price.

And John I would add to that that on the mining side of our business, remember last year we mentioned that the drop was so significant that we had to slow down our mine -- and our mine and smelter are high fixed cost operations, we're back to running those assets at full capacity in 2024.

Got it. Okay. No, that's very helpful. Thanks very much for the color.

Your next question comes from David Begleiter with Deutsche Bank. Please go ahead.

Thank you. Good morning. John, you mentioned the prospects for higher pricing in H2 this year. What do you think will manifest first in the region and by what end-markets and customers?

Yeah. So we typically don't give a lot of regional view on that, but I would expect -- what is in the first quarter as pricing was going to be relatively flat both on zircon and on TiO2. And we did largely see rollovers moving into the first quarter of 2024. I would suspect that as we start to migrate out of the first quarter, we'll start to look at pricing opportunities across all regions. And there's a lot of activity. We've got a lot of questions about the antidumping. Everything that we're talking about right now has nothing to do with antidumping, right? Antidumping if it actually happens. And it gets input and provisional duties come in, that could be something additive to this. But what we're talking about right now is just generally what we're seeing in the market -- we would see -- these are all the signs and indicators that would indicate pricing would start to move up. It's not in the first quarter, but we're hopeful we'll start to see some sort of movement as we move into Q2.

And John, on the antidumping, are you seeing any change in bad behavior yet, because of this investigation? And how -- what's the timeline from your perspective for the EC to act here?

Yeah. So maybe on the timeline, the formal investigation from the Commission what happened was the coalition -- this was a coalition that was formed back in November of 2023, when the dumping suit was filed. We would expect the formal investigation to conclude in the second quarter. And under the process, the final recommendation won't happen until the fourth quarter. However, there could be a possibility that provisional duties could get put in place sometime as early as the second quarter but that's yet to be seen. As far as, are we seeing any real significant buying change I'd say we're seeing a little bit but nothing significant. There's some I'd say export activity that's going on that's in line with what we would have expected, as a dumping suit was filed in EU.

Thank you.

Your next question comes from Josh Spector with UBS. Please go ahead.

Yeah. Hey guys, this is James Cannon on for Josh. Thanks for taking my question. Just if we go back to kind of the comments you gave on the project of the mining projects you're doing in South Africa? Can you just give a little color as to the rationale behind moving forward with them now as opposed to once we've gotten back to kind of a more steady state? I mean it seems like with the mining rates having come down last year there would be additional capacity to kind of lift rates elsewhere in the system and maybe not require that CapEx at this stage?

Yeah. Look, so last year we delayed those projects -- both projects in South Africa. One was a little bit further along than the other one. So we have to run our business on the long-term. And the mining projects actually do require a longer view than clay earnings. So we feel that it was an appropriate delay, what we did last year. We spent sometime bolstering our liquidity last year for that specific purpose, to make sure that we had the ability to invest in these assets, because at the end of the day, as I mentioned on the call these are actually replacing mines that are coming to the end of their lives. So if we want to maintain our zircon volumes in the Ilmenite to feed our smelters, these are long-term projects. And we've got a five-year plan for our TiO2 business but like a 20-year plan to manage our mining. So we feel that what we're doing at this particular stage is not only appropriate it's needed to make sure we can maintain our long-term business.

Okay. Thanks. And then just on timing with those – can you give some commentary on when you anticipate those to start producing and whether or not there will be any drag on OpEx or absorption as those do start up?

So is – in both of those mines, there will be basically a transition from the end of the mind of the previous one to a transition to the new one. So there shouldn't be a lot of lag or lead time moving in, it's all timing as we move out of one body of ore we'll be moving into another one. So there shouldn't be a lot of transition. Obviously, as we're bringing up some of the mining equipment, there could be a little bit of transition but we don't expect that to be a drag.

I think as we start new mines obviously, there's the whole resource there and we do optimize to bring out the higher value or earlier on, so we would expect and when those lines come online and see some positive benefit.

Okay. Great. Thanks.

Our next question comes from Duffy Fischer with Goldman Sachs. Please go ahead.

Hey, good morning, guys. If you could – your CapEx assumption for this year is $395 million. Your operating cash flow last year was $184 million. So to be free cash flow positive this year that means you need to grow your operating cash flow a little over $200 million this year. Can you just walk through how you see those buckets coming through? How much of that would be an improvement in EBITDA? How much of that would be things like improvement in working capital. Anything else on the cash flow statement kind of before the operating activities that would get us at $200 million plus?

Yes. Duffy, thanks for that question. And we aren't guiding for the full year. So from an earnings perspective, we are optimistic obviously, expect an improvement year-over-year and ultimately our free cash flow, the scope and size of that positiveness, we expect will depend on market dynamics there. But from a working capital perspective that's the earnings and working capital are the biggest drivers. Obviously, we guided on interest negative $145 million taxes less than $10 million. And as you mentioned CapEx of $395 million, so we do expect both free cash flow and working capital to be positive. From a working capital perspective, we do see – obviously, sales are going up, the AR is going to be hurt but that obviously is a good working capital use there. And we do see inventory – we are building some inventory and that play with inventory and AR will all depend on top line sales growth. We do expect payables as well to be a source of cash as we are actively managing that throughout the year. So that's kind of where we are on free cash flow.

And just generically from the operating side again, we talked a couple of times about running at – I think we've even thrown numbers up, 70% capacity utilization for over a year. And as we started to ramp up those assets as early as December of last year and into the first quarter, obviously a little teething as you start to move up from those lower rates. So it wasn't super smooth to get to where we are today. But now those assets are running – so when you think about that $25 million to $35 million a quarter that we talked about as a negative due to fixed cost absorption, we'll start to see similar results. And some of these unplanned outages that we have will be added on to that. So there'll be a significant portion of that. So when we think about the growth, it's obviously price is an opportunity, but running our assets at rates that are at a more normalized level which are in line with what we've historically seen on EBITDA margins as I mentioned before, is going to be a big driver in our profitability.

Okay. Thank you. And then there have been several reports out of South Africa with two of their larger unions in the mining industry kind of fighting and there's I guess, been some kidnapping and stuff like that. Do you have both of those union your operation? Or are you kind of a single union? And then again, so are you seeing any issues with your operations or any of the other TiO2 operations in South Africa?

Duffy, I mean, I can tell you we only have one union in our case and we're lucky to be in an area where there is no revality and no issue between the union. Look, we have always stated that our approach in South Africa is to work with our community, our worker or not remote worker, they're local, they are member of the community where our mine and smelter are located and that makes a huge difference with the dynamic. Often and all those issues that we heard about South Africa are related to where workers are like remote in Austal and we don't have that issue at our mine.

Great. Thank you, guys.

Your next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks very much. I think your TiO2 volume for the past two years is down about 15% each year. How do you think the industry shrank over 2022 and 2023. How did you do compared to the overall industry?

Yes. Thanks, Jeff. Look you're right. If you look at our -- over the last two years, I think our volumes were down roughly 27%. So 15% a year is pretty much accurate. And China obviously grew. I know you take an interest in paying a lot of attention to the exports coming out of China. China has taken a significant growth, specifically in Asia Pacific. India has become a significant importer of Chinese material, a lot of Asia Pacific so not just in China. So I do think that over time, I think we've probably lost a little bit of share to the Chinese and we've done that based on where we feel like it was not competitive. That being said, I think others probably were heard a bit more than the Chinese were our -- I think our chloride capacity has provided us an opportunity to avoid some of that. That being said, we feel like we can compete directly with the Chinese, there's lots going on. We've already talked about with some of the efforts that are trying to manage that in the European market. But I would suspect that the market is still growing. China took a disproportional share of that growth over the last couple of years.

Okay. Thank you for that. And can you just give us sort of a status report on Project Neutron that is -- how much more is still to be spent? What have the savings been? And what could the savings be? Where does all of that step?

Yes. So, for 2024, we've still got about $20 million to spend. So, we're going through some additional launches of S/4HANA in Asia-Pacific as early as July of this year. So, we're still working through that process. And I don't know John you maybe talk a little bit more some of the upsides as far as what we're seeing an opportunity. But there are -- we think about automated process control toys, which is Tronox' operational information system. All those things are being utilized to extract more out of our assets. I think early on there was a fair amount of additional value that was coming from volume which we haven't seen yet. So, we would start to see that. I'd say probably more towards the end of this year and early into next. But John?

Yes. John that's exactly right. I mean we still do believe in the benefits that we're going to see from Neutron. We quoted it historically $150 to $200 per tonne. And a big portion of that -- we did capture already from procurement savings although that was masked by the significant escalation we've had over the past couple of years. But from a volume perspective we said those are on hold. But frankly we think that some of those benefits will accelerate as we are bringing up our assets. So, we do expect to still be within that range. Obviously, we only have deployed as John mentioned in Asia-Pacific. So, we will need to -- from a systems perspective, but we have deployed from some of the other operating enhancements at multiple sites. So, we do expect to see those benefits from a volume perspective.

And this is Jennifer. Just if I can add. We are seeing benefits at a site level from the deployment of some of the technologies like automated process control. So, for example we're seeing reduced coke consumption in our chlorinators. When you look at a like-for-like comparison on the volumes produced, it's just a bit masked because of the low run rates that we're operating at. But for example this did have a positive effect on our GHG emissions. It reduced our intensity because we're more efficient for the tonnes we're producing. So, we are capturing benefits, not all of them necessarily on the P&L. We're seeing them on the sustainability side of the business. But as we ramp our assets back up, we would expect to consume lower raw materials like coke in our chlorinators per ton of PO2 and this should translate to benefits on the P&L.

So, the spending is essentially done or the $20 million more to go something relatively small, but as you ramp up, we should see the benefits. Is that the general--?

Yes, that's correct. And just to Jennifer's point I mean the whole idea about that one automated process control on our chlorinators, we have 24 across the system. And last year I think we finalized the implementation of all of that across the entire system. So, again as we start to ramp up the assets we'll start to get a lot more of that value as Jennifer noted.

Maybe if I can sneak in one question. Can you talk about what's going on with chlorine prices and what you expect for the year?

So, what I can say is that our chlorine prices have continued to move in a positive direction on the downside. So, chlorine is very different depending upon the region. So -- in Saudi Arabia, we make our own chlorine. In Australia, we have a lot of purpose-built plants. But in North America, we buy merchant chlorine and we've seen what I would say is a significant reduction in Q4 and in Q1 on chlorine prices, which is going to have a positive impact as well. Q – Jeff Zekauskas: Okay. Great. Thank you so much.

Your next question comes from Mike Leithead with Barclays. Please proceed with your question. Q – Mike Leithead: Thank you. Good morning, guys. First question, what are you expecting from a zircon pricing outlook?

So, I think I mentioned in the previous -- or in my prepared comments for the fourth quarter or the first quarter, we saw a rollover on pricing. So there was actually a slight bump up in price from Q1 -- from Q4 to Q1, but that's all mix. So in the first quarter, we're seeing flat pricing and look a lot of it is going to depend on how the market continues to evolve. July of 2023, was a very low point, but that was the bottom and we've seen the market continue to improve. Q1 -- our Q4 sales were up 82%. We forecasted in the prepared comments 15% to 30% additional increase in the first quarter, that big swing has a lot to do with whether a big bulk shipment is actually going to go this quarter or not. All of that growth is on the back of not much growth in the ceramic industry in China, which is about 50% of the market. So we're seeing the market recover. We believe that destocking has run its course. Customers are buying again, and we're starting to see an uplift, even in China and the nonceramic applications, we started to see restocking occur. So we believe destocking has run its course there as well. So, all of that would indicate that as we move through the year, we should start to see positive movements in zircon pricing, but it's a little bit too early to provide a clear forecast on that yet. Q – Mike Leithead: Great. Thank you. And then again, I apologize if I missed it, but -- what's the latest update on Jazan? Or are you still expecting to get the full repayment in kind? And was the technical service agreement extended again? Or do they roll off?

Yes. So, look we're still working with Jazan. The debt is due in January of 2025. We continue to get slag in lieu of -- and that slag is actually going towards the payment of the debt, and there's not much change in our agreement, with them at this particular stage. So, still continuing to work with them. And the slag that we're getting is largely going down to pay down debt. Q – Mike Leithead: Okay. Thank you.

Your next question comes from Hassan Ahmed with Alembic Global. Please go ahead. Q – Hassan Ahmed: Good morning, John and JF.

Good morning. Q – Hassan Ahmed: Quick question around the cost curve, the global cost curves as you see them right now. I mean look as I sort of sit there and think about the EBITDA margins that you guys just reported in Q4, call it 13 and change percent. Obviously, down from Q4 of 2022 levels of north of 17%, 17% plus in Q3 I mean, I'd like to thank you guys being as integrated as you are, obviously, and you talk about this as well enjoy sort of a margin premium relative to your competitors globally. So I'd like to think, that there's a large chunk of the industry that is at breakeven to maybe even negative EBITDA margin, right? And then I sort of sit there and think about the guidance that you've given for 2024, of mid-teens EBITDA margins. I mean does that get -- if the industry moves in that direction, I mean are you sort of guiding to the industry beginning to make sort of positive EBITDA margins. I mean, I'm just trying to get a sense of where the industry is, are these sort of breakeven to negative margins sustainable for the industry? And maybe potentially are you being conservative, in giving the margin guidance that you guys have given?

Thanks. Look the guidance that we gave for mid-teens was for Q1. And I think, we got a question a bit earlier about where do we see the business moving a lot of that margin -- let's just say price doesn't move, which we've said we expected to, but if price didn't move. Our margin is going to improve as our capacity increases. And by mid-year we would expect that our EBITDA margins will be back in the 20s. We ran 18 months -- 18 quarters in the mid- to high 20s. So just put pricing aside running our assets, because of our vertical integration is actually going to do just exactly what you said, it's going to get us to normalized EBITDA margins. On our competitors, I'm not going to speak to them, but they're publicly -- their information is publicly available. I wouldn't disagree with the comments you made. I do believe that, the Chinese are in that similar boat, with not making significant EBITDA margin anywhere. We believe the majority of them are losing money. So we believe our margins are going to improve and 2024 is going to be a much better year and ultimately, where we are as an industry is not a sustainable place to be. Negative EBITDA margins don't -- you can't do that for very long, because people don't have balance sheets to support that.

Fair enough. And as a follow-up, if I could revisit, the whole sort of European Commission antidumping side of things. I mean, is it fair to assume whatever direction the final ruling takes. I mean, is it fair to assume that it's almost like 200,000 to 250,000 tons of sort of material that is up for grabs and that could potentially entirely go towards the Western producers?

Yeah. Look, I guess up for grabs is a way to look at it. But if I'm a Chinese producer, I mean, the other option would be for them to raise their price. But once the duty is in place, I think that that is going to drive some different behavior for sure. And -- it's early days. Like I said, the formal investigation won't end until the first quarter -- end of the first quarter, and then it will typically be the end of the year, before the process is complete. Provisional duties could come sooner than that. So we're just kind of -- again, this was something that was led by a coalition of suppliers. So we don't -- it's not like we have exact data on what's happening, but we do have a pretty good feel on a pretty good idea of where we are in the process. It's just a bit early to determine what that duty is, and if it's going to get implemented. But if it were to yes, I would definitely think that, there's going to be some volume shift, and some pricing opportunity.

Perfect. Thank you so much.

Your next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Vincent Andrews, your line is open. Your next question comes from Roger Spitz with Bank of America. Please go ahead.

Thank you, and good morning. Two questions. The first one is for 2024 in addition to EBITDA CapEx what have you that you've identified when I refer to as other free cash flow items you identified a potential $50 million insurance recovery. Are there any other so-called other cash flow items for 2024 that we should think about whether restructuring or other items in your operating cash flow?

No. Roger, we don't have anything forecasted or expected at this point other than the insurance recovery that you mentioned.

Got it. And then second is, I know it's early days, but I just want to fill stuff in on the model. For 2025, how should we think about CapEx with relation to 2024? Same level or different? And perhaps the cash tax rate in 2024 you talked about South African mining operations. Does that repeat in 2025? Or is that more back to a normal cash tax rate?

Yes. So look, we don't have a complete forecast for 2025 capital yet, but it will probably be slightly lower than what we have. We still got some other mining projects going on. And John, you can comment on the tax. But to the extent we're still spending money in South Africa that would be deductible. So it's a little early to come up with what our tax.

I agree with that, John. And we will be spending -- if this is not a one-year investment in South Africa is multiyear. So those expenses that we would spend on capital in South Africa would be deductible in '25.

Thank you, very much.

Your next question comes from John McNulty with BMO Capital Markets. Please go ahead.

Yeah. Hi guy. Sorry just one follow-up. So, when I look at your inventory and the hit that it's had on working capital over the last couple of years, it's about $400 million in the last two years. If you return to kind of more normal operating rates at the middle of this year, I guess, how long realistically will it take to reverse that inventory drag where you see a source of funds from inventory. Can you clean all that up in whatever two to three years? Is it hey look, this could take a very long time? I guess I'm just not sure with the mining side, how to think about how this all could work through and how quickly you could recapture some of that lost inventory?

Yes John it's a good point. As we mentioned we have a long supply chain. So, while in the past 18 months or so, we did slow down our pigment sites and brought down that inventory. We were running our mines relatively flat out to build some feedstock inventory. If you take a look at 2024, we actually do see that reversing. Inventory, we do expect that's a bigger swing historically on what was driving the negative working capital change. And as we've guided, we do expect working capital to be positive and a lot of that is owing to inventory cashing out on that.

I guess, can you get the full $400 million back? Or is there some reason why that won't be the case. And I don't mean in '24. I just -- is there -- are we at kind of a new level for one reason or another? Or should you be able to reverse that $400 million inventory headwind from the last two years?

Yes. We would expect that we would recover that over time. Not in '24.

Got it. Thanks very much for the color.

Thank you.

Your next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Hi. Thank you. This is Turner Hinrichs on for Vincent. In your slides, you mentioned that February and March order books are tracking above strong January sales. Do you mind touching on what end markets or channels are driving the strength and moving inventory levels that you're seeing?

Yes. Look so those are -- it's basically across the entire market. So, every region we're seeing additional volumes, I mentioned that we're seeing -- again, North America didn't drop as much as it, I think, the other regions, and it's I'd say, a little bit slower to picking back up. We referenced in the fourth quarter. We saw a little bit more seasonality, but we're also seeing North America pick up a little bit stronger in the first quarter. So, I'd say, it's across the board and it's not specific to any particular end segment. So it's coatings, plastics paper and specialty.

Great. Makes sense. Do you mind providing some additional color on what you're seeing for important export trends? And if you have any details as it relates to freight cost if they're affecting those trends or the underlying macro across the regions that would also be great.

Any specific reason you're referring to on imports and exports or just generically?

Generally it would be interesting to hear about Chinese exports or European imports broadly both given Chinese export trends and the antidumping probe that would also be of interest.

Yes. So in China over the last couple of months we don't have actually January numbers yet. But I'd say, November and December, we continued to see an uptick, which was not I'd say surprising considering there was a an antidumping suit filed. So we've seen some additional exports coming out of China. And Europe is obviously a big market for bringing in material from China -- we've -- as far as some of the activity going on in Europe and other areas, I referenced some issues with imports and exports due to the congestion in the Red Sea. So for producers that are in Europe, I think, they're actually getting a little bit of benefit from that depending upon where they're located and where they're shipping. But I wouldn't say, there's significant change in activity. Now on the freight, we are seeing some positive moves on freight. What's happening in the Red Sea is, I'd say, a bit more of a short-term anomaly. We're seeing some spot rates that are higher than what we put in our forecast. But historically, we -- over the course of the last 24 months, freight rates have gone up significantly and we're starting to see those abate and that's I'd say a tailwind for us as we think about our 2024 forecast, although, right now some of those rates have been, I'd say, negatively impacted due to some of the activity that's happening in the Middle East.

Great. Thank you so much for the color.

I will now turn the call over to John Romano, Co-CEO.

Thank you operator. Look, we're very confident in where we are with our company moving into 2024, and our vertical integration strategy we believe will continue to provide our competitive advantage. We remain optimistic in the short -- the long-term for Tronox the value creation from a lot of the projects that we're doing including sustainable mining and upgrading solutions. So, I'd like to thank you all for your interest in Tronox and your support, and have a great day.

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