Hello, and welcome to the Tronox Holdings Q3 2022 earnings call. My name is Harry, and I'll be your coordinator today. If you'd like to ask a question during the Q&A, you may do so by pressing star one on your telephone keypad. I'd now like to hand you over to Jennifer Guenther, Vice President of Investor Relations, to begin. Jennifer, please go ahead. Thank you, and welcome to our third quarter 2022 conference call and webcast. Turning to slide 2. On our call today are John Romano and Jean-François Turgeon, Co-Chief Executive Officers, and Tim Carlson, 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 uncertainties. 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 this accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. Moving to slide four. It is now my pleasure to turn the call over to John Romano. John? Thanks, Jennifer, and good morning, everyone, and thank you for joining us today. For those of you who have joined who may be a little less familiar with the Tronox story, we're the world's largest vertically integrated TiO2 producer, with nine pigment plants, six mines, and five upgrading facilities across six continents. 2021 revenue totaled $3.6 billion, which was fairly evenly distributed across the Americas, Europe, Middle East and Africa, and Asia Pacific. Our 1.1 million tons of pigment capacity supports our well-balanced base of approximately 1,200 customers globally. Our vertically integrated business model supplies approximately 85% of our internal feedstock needs, and this ensures consistent and secure supply for our customers. In addition to TiO2, we also generate significant value as the world's second-largest producer of zircon, with approximately 300,000 tons of capacity. I invite you to listen to a replay of our Investor Day webcast from June, if you haven't already done so, to learn more about our strategy, key initiatives, and mid- and long-term financial targets. Now turning to slide five. Tronox's strong margin performance continued in the third quarter, enabled by our vertically integrated portfolio despite difficult market conditions. We achieved adjusted EBITDA of $247 million within our updated guidance range and adjusted EBITDA margins of 27.6%. This is now the 22nd quarter in a row that we've achieved adjusted EBITDA margins greater than 20% and the eighth consecutive quarter where margins were above 25%, evidence of the strength and resilience of our business through a variety of economic scenarios. We invested $314 million in ongoing key capital projects that reinforce Tronox's commitment to strengthening our business model. We returned $110 million to shareholders year-to-date, including share repurchases and dividend payments. Finally, we're now realizing increasing value from Tronox's higher-value co-product streams, which include monazite, consisting of high-value rare earth elements. The monazite is a higher margin because it carries very little cost, as historically, those co-product streams were stockpiled as waste. This demand for light rare earth elements found in monazite is increasing dramatically, given their use in many facets of the emerging green economy, including permanent magnets for electric vehicle motors and wind turbines. While revenue for these co-product streams is less than $30 million year-to-date, the rising interest has driven a 74% increase in high-value co-product revenues year-over-year, enabling Tronox to realize greater value from what it was previously viewed as waste. This provides an interesting growth opportunity for Tronox to not only generate incremental earnings, but also support growth in the renewable energy space. Turning to slide 6. Our third quarter revenue of $895 million represented a 3% increase driven by higher TiO2, zircon, and pig iron prices and higher pig iron volumes. Income from operations was $163 million, and net income attributable to Tronox was $121 million. Our GAAP diluted earnings per share was $0.77, and our adjusted diluted earnings per share was $0.69, with the primary difference being due to a 10% share benefit we recorded in the quarter for an adjustment to a valuation allowance of an Australian deferred tax asset. Adjusted EBITDA of $247 million represented a 2% decrease, largely due to softer market conditions. Our margin decreased 140 basis points to 27.6%, driven by higher costs and unfavorable product mix from higher pig iron volumes that rolled from Q2 to Q3. Finally, we generated $25 million in free cash flow, which was impacted by the inventory build in the quarter from both Jazan feedstock purchases and the replenishment of safety stock as a result of softer demand. We're taking action to address this in the Q4, as JF will review with you in a few minutes. Moving to slide 7. As we communicated in our release last month, TiO2 volumes were softer in the quarter due to significant reduction in demand in Europe, Middle East and Africa, and Asia Pacific. Pricing across both TiO2 and zircon was in line with our expectation, driven by our continued execution on our commercial pricing strategy. TiO2 volumes declined 13% sequentially, while average selling prices increased 3% on a local currency basis or 1% on a U.S. dollar basis. Zircon volumes improved 8% compared to the quarter, owing to the orders that rolled from the Q2 and into the third quarter. Positive pricing momentum continued in zircon, resulting in a 7% price increase versus the prior quarter. Revenue from other products was $94 million, an increase of 31% driven by higher pig iron and rare earth revenues. The strengthening U.S. dollar in the quarter was a headwind to revenue due to the unfavorable translation impacts, primarily from the weakening of the euro. Looking to the remainder of the year, we expect Q4 pigment demand to decline 25%-30% sequentially, driven by customer destocking, continued weakness in Europe, Middle East and Africa, and Asia Pacific, and seasonal weakness in the Americas. Customer inventory levels remain low relative to previous periods of economic weakness, so we do not believe we will see similar levels of destocking as we move into 2023. Based on this and direct customer feedback we've received, we are confident Q4 will be the trough for TiO2 volumes. We continue to see the benefits of our vertical integration and margin stability initiatives in our financial results. As we've communicated previously, we do not expect pricing to move as it has in previous economic transitions, owing to the differentiated landscape and the commercial approach that we've implemented over the last several years. I'll now turn the call over to Jean for a review of our operational performance. Jean? Thank you, John, and good morning. Turning to slide 8, our Adjusted EBITDA sequential decline was driven by higher costs to serve our customers, including increased commodity costs, in addition to lower volume, partially offset by higher pricing across all products and favorable exchange rates on our operations. We saw a headwind to margin from product mix as higher sales of pig iron in the third quarter had an unfavorable impact to margin. Freight rates remained level from the prior quarter as increases abated. Costs have been a significant headwind in the year, no different than other players in our space. Our major materials increased 12% sequentially or 58% year-over-year on a constant currency and volume basis, primarily driven by coke, chlorine, sulfur, sulfuric acid, and energy costs. The 58% increase on our major material equate to a $95 million headwind versus the prior year. In total, $29 million of the $50 million sequential headwind to EBITDA from production costs was driven by higher cost unsold in the quarter and lower fixed cost absorption. We also incurred a $17 million lower of cost or market charge due to lower pig iron pricing. The weakening Australian dollar and South African rand had a favorable impact on production costs and more than offset unfavorable FX translation impact to revenue. This result in a net positive $14 million FX impact on EBITDA compared to the prior year. Turning to slide nine. As a result of the macroeconomic backdrop, we are taking action to navigate the current landscape and position Tronox for success. We employ a robust process as a part of our forecasting review that enables us to plan for a variety of economic scenarios. Combined with our enterprise optimization model, we are able to react swiftly and optimize our portfolio. We continue to be laser-focused on cost reduction and have a number of levers to optimize performance across a variety of scenarios that we are executing on. We have already begun executing on our cost reduction playbook. We have implemented a hiring freeze. We are reducing professional fees, travel, and other discretionary costs. We are also optimizing our fixed costs and driving additional supply chain initiatives. Softening demand drove increased TiO2 inventory levels in the third quarter and allowed us to replenish our safety stock, which has been below seasonal normal levels for the last several quarters. Additionally, the contracted purchase of Jazan slag drove increased feedstock levels. As a result, we have taken action to reduce production level due to lower customer demand. As we have highlighted previously, the vertical integration investment in NewTRON are key project to support our medium and long-term profitable growth initiative. However, we have implemented plans to significantly reduce our annual capital spend to below $275 million in 2023 to adapt to the macroeconomic environment as it unfolds. While this will delay our ability to realize benefits from these projects, we do believe this is the appropriate decision for the business at this time, and it is consistent with our ability to flex our capital spend. We anticipate these actions will enable Tronox to generate positive free cash flow across a variety of scenarios, including our recession case. We will continue to balance cash generation while ensuring we have the product necessary to meet our customer needs and are effectively positioning Tronox for future success. I would now like to turn the call over to Tim for a review of our outlook. Tim? Thank you, JF. Turning to slide 10. We continue to monitor developments through a monthly bottoms-up view of market trends. Our process involves a robust discussion to thoroughly evaluate identifiable risks and opportunities to our forecast. Based upon our current review, we expect Adjusted EBITDA in the range of $140 million-$170 million for Q4. This assumes TiO2 volumes decline 25%-30% sequentially. The range also includes approximately $10 million in total one-time charges from lower production levels. As a result, our expectation for our full year 2022 Adjusted EBITDA is to be in the range of $902 million-$932 million. Our updated cash use assumptions are as follows: We expect working capital to be a use of $200-$230 million as a result of increased inventories across feedstock and TiO2, which we are proactively managing in Q4. Net cash interest expense of approximately $115 million. Cash taxes of approximately $60 million. Capital expenditures of approximately $425 million. We also anticipate completing a securitization facility on a portion of our accounts receivable that has been in the process since Q2, which will generate a one-time benefit of approximately $125 million in free cash in Q4. Based upon these assumptions, we expect our free cash flow for the year to be greater than $150 million. These continue to represent our best estimates based upon our current market outlook. We have ample levers to ensure sufficient liquidity under any conceivable scenario. JF reviewed the actions we're currently taking. We remain focused on executing the strategy we detailed at Investor Day and delivering on our commitments. Given what we know today, we remain confident in achieving our recession case in 2023. That concludes our prepared remarks. With that, I'd like to turn the call over for questions. Harry? Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad now. Our first question of the day. Sorry, for our first question of the day, we are going to Duffy Fischer from Goldman Sachs. Duffy, your line will be open now if you'd like to proceed with your question. Good morning, guys. First question. We've had a number of the coatings guys go, which is kinda three quarters of your volume. Their volumes, they're, you know, don't appear to be anywhere near as bad as the down 25%-30%. Can you talk about where you're seeing that destocking is at? Is it a trader level? Is that at large customer? Is that your inventory that needs to be destocked? You know, kinda walk through how big of a chunk that 25 is, destocking versus what you think real demand or consumption is in the Q4, please. Thanks, Duffy. This is John. Look, it's a combination of a variety of things. We made reference that we were building some inventory. We recovered some of our safety stock in the third quarter. Part of the destocking will be for us to slow a bit, slow further down as a result of demand. But to your specific point, and we referenced it in the prepared comments, based on what we're seeing from our customers, what we're hearing from them and some of what some have reported, we believe the destocking event is going to basically be finished by the end of the quarter. The 25%-30% number that we referenced is based on what we're seeing with regards to order patterns. We have a lot of customers that are obviously using this ability to negotiate to try to get better prices. That's absolutely something that happens. Anytime you walk into the first, I'd say, real quarter of a downturn, we believe that those numbers are significantly lower. You can't take that number and then kind of multiply it by four to get what we think is gonna happen in the coming year in 2023. Short answer is we believe the destocking will be complete by the end of the quarter, and you know, that's why we're confident that we said that we believe it's the trough for TiO2 volumes is the Q4. Fair. Thank you. Obviously, you're integrated, so ore costs don't matter as much for you directly, but your competitors, you know, buy market-based ore. What do you see in the ore market going into next year? Will they get cost relief on that side meaningfully and therefore maybe allow them to bring down pigment prices and compete with you more on the pigment side? Or do you think ore will hang in there and is tighter structurally than pigment itself is? Duffy, thank you for this question. Look, we continue to believe in the strength of our vertical integration. As you know, at the beginning of the year, I mean, we were talking about a shortage. Of raw material to feed the pigment demand. Look, it's clear that with a 25%-30% drop in one quarter, that changed the dynamic. One quarter cannot make an adjustment for pricing on projects that takes five-10 years to realize. The reality is the world GDP, and we always said TiO2 is in line with world GDP, is not dropping by 25%-30%. I think the point you made, we agree with your comment. It's not sustaining what is happening in Q4 in TiO2, and it's obviously not gonna be sustaining for the feedstock part of the business either. Look, we have seen in China that the ilmenite price that is imported continue to grow and the price of that ilmenite continue to increase. There was absolutely no price going down for imported ilmenite to China, even with a weak demand and weak production of pigment in China. Even the local ilmenite in China has been very stable and they have stopped and slowed their production instead of lowering price. That's true for all of the feedstock at the moment. We feel very confident with our vertical position related to that situation. Great. Very helpful. Thank you, guys. Thank you. Our next question for the day is from the line of Josh Spector of UBS. Josh, your line is now open. Yeah. Hey, guys. Thanks for taking my question. Just wanted to ask on the Q4 guide, and you talked about the one-time cost impact due to reduced production. I guess, can you separate what that cost impact would be from, I guess, a reduced overhead absorption there versus kind of fundamentals of volumes? And kind of related to that, for Tronox, there tended to be kind of a lagged impact for a number of quarters when you reduce rates of higher cost inventory flowing through. You call this one time. Is this time different or should we expect to see that into early next year as well? Hey, Josh, it's Tim. Great question. There are really two components that we think about. One is the increase in production costs as a result of unfavorable fixed cost absorption, which does end up in inventory, and as you said, you know, does roll into the following quarter. However, there are certain lines that we'll be taking down for a little bit longer period of times. When that happens, we actually take the charge in the quarter rather than putting it into inventory. There's about $10 million of incremental cost in Q4 associated with costs that we flow through immediately, and we don't allocate to inventory. There's probably another $15-$20 million of cost as a result of the lower production, that'll flow into the inventory costs that will flow through into Q1. Josh, just maybe one more comment on that. We have nine TiO2 plants on six continents at different levels of inventory. That flow-through that we talk about moving into the Q1 of next year, some of that's gonna hit us this year because we don't have the amount of inventory that we had historically. Great point. That is gonna actually impact us a little bit in the Q4. Thanks. That's helpful. Just on the mining side of it, maybe related to the prior question to an extent. I mean, I know, Tim, you're kind of loathe to reduce operating rates there where you don't have to. That's been part of the benefit of the backward integration. Are you gonna build inventory there or would you consider selling any of that into the market to keep your inventories more lean and take advantage of some still semi-tight market conditions on the ore side? Another great question, Josh. We look at all opportunities as it relates to our mining operations in terms of managing costs and optimizing the profit. We look at maintenance schedules in terms of how we can do maintenance schedules cheaper, without overtime and without side services. We look at opportunities to sell excess feedstock. The one item that is hurting us a bit in Q3 and Q4 that we had talked about is we are building a bit of CP slag as a result of the production coming out of Jazan. Maybe, Josh, I could add that we have some timeline in mind, what we call satellite deposit, that in time of high demand, I mean, you incur more costs to get more product out of those remote areas. Obviously in times where you see a drop of 25%-30%, I mean, we stop those site operations and save costs by doing that. We're actually doing this. Some of the projects that we would do historically with contract workers, we're doing those with our own workers to reduce cost as well. Okay. Thank you. Thank you. Our next question is from the line of David Begleiter of Deutsche Bank. David, your line is now open. Thank you. Good morning. With respect to your European footprint, are you considering making any permanent changes given the higher energy environment you're looking at going forward? No, Josh, this is John Romano. Sorry, David. We are not looking at making any permanent changes to our footprint in Europe. Quite frankly, if we think about our biggest impact on energy actually was in the U.K., and we have gotten some relief. We had some more risk in our Q4 numbers prior to the U.K. coming in with a cap on what natural gas prices are gonna be. What was a significant headwind moving into the Q4, some of that's been abated based on what you could call a hedge, which was put in place by the U.K. government putting a cap on energy. Yeah. David, we have a strategy to reduce our dependence on natural gas in our facility, and that's part of our five-year plan to continuously improve our cost position. That's why we feel confident with our footprint there. Understood. Just on Project NewTRON, you mentioned that there were some delays in realizing the savings given the reduced CapEx. Could you quantify those delays and time the future benefits going forward? Thank you. Yeah. David, it's J.F. Look, we always mention that NewTRON was a project that gave us flexibility to adjust to the market condition. Obviously, we want to reduce our capital expenditure in 2023. We don't need the additional volume that NewTRON was about to give us. We want the benefits of the cost reduction of NewTRON, and we continue to work on NewTRON. We don't stop it. We just slow it down. The impact of that decision will mean that the benefit will probably come more in 2024, well, the remaining benefit. Because, I mean, the benefit that we already have achieved with it, which is around $75 million for this year, we will still have those benefits in 2023, and we will continue to get some, but at a slower pace. We're still very confident in the $150-$200 per ton, but it's gonna be probably mid-2024 and 2024 instead of what we had originally anticipate. Thank you very much. Thank you. Our next question is from Hassan Ahmed of Alembic Global. Hassan, over to you. Morning, John and J.F. You know, question on volumes. While, you know, I'm obviously cognizant that you can't talk about competitors, but as I take a look at Q3 TiO2 volumes, you know, Chemours sequentially down 8%, you guys sequentially down 13%, Venator guiding to declines of 25%. I mean, just any color around these sort of, you know, fairly large variances across the TiO2 majors in terms of sequential volumes. Thanks, Hassan. This is John. Look, to your answer, you're right, we can't speak specific to competitors, but we'll talk generally. You know, for us, Tronox, one of the first areas that we obviously saw the slowdown in was China. We have an operation over there. It's not a huge one, but that was one of the first plants that we actually slowed down. You know, our impacts, I do believe we have a little bit more exposure in the APAC market. When we think about those three competitors, you know, quarter-over-quarter is one thing. I think you also have to look at it maybe a bit further than just one quarter. Everybody has a different customer profile. Some customers are different than others. Some are driving, you know, working capital adjustments. I'm not reading into that variance to be too significant between at least two of those people that you referenced. You know, we're focused on what we can control and influence. With regards to what we're seeing moving forward, even what we're hearing from our customers, a lot of what's happening is clearly demand-driven, but there's a big portion of this that is destocking. We've referenced the landscape's different. The landscape's different because we still do not believe there's anywhere near the amount of inventory in the system that there was during the last downturn. We've already got customers that we're pulling back that we're getting random last-minute orders on. All the signs are out there which would indicate and support the comment that we made in the prepared comments that we believe the Q4 is in fact going to be the trough. As we move into 2023, our number, our volumes are gonna pick back up. Fair enough. As a follow-up, just on the Q4 guide, you know, $140 million-$170 million, you know, obviously understand the fact that Q4, you know, seasonally is a weak quarter. You know, on an annualized basis, that's, you know, $560 million-$680 million in EBITDA, which obviously is below the trough guide of $800 million-$1 billion that you guys have given. My question really is, with the market sort of, you know, shaping out to be the way it is, and you guys reiterating that sort of trough guidance number, what gives you comfort around that? Tim, you wanna start? Yeah. From my perspective, Hassan, the cost-saving activities that JF talked about are in process now. We haven't yet realized the true benefits and the full benefits of those cost-saving activities. You know, I talked about some unfavorable absorption rolling in, into next year. The cost-saving activities that we have in place more than offset that unfavorable absorption and also will further support and increase our EBITDA. On top of that, you know, the recession case that we outlined was for a 10% volume decline. We don't expect 25%-30% volume declines going forward, because of the destocking that's happened. As a result, with that incremental volume coming back much lower than 2019 levels, you know, that volume alone will also support our recession case. I guess just to go back to the point you made the reference between the range on EBITDA, a lot of that will be dependent upon volume. What we're seeing in the month of October was a significant reduction, and we even have expectations that within that range we might see higher numbers on volume pickup, as I mentioned, where customers are starting to place orders, a little bit at the last minute. There is a volume element of that that's factored into that range for the Q4. Very helpful. Thank you so much. Thank you. Our next question is from the line of Frank Mitsch of Fermium Research. Frank, your line is now open. Thank you and good morning. Yeah, typically, I think of Q4 as a time to build inventories. You're obviously, it appears comfortable that you've rebuilt your safety stock, and you're lowering production and obviously others in the industry are lowering production. I'm curious as to, you know, what your target inventory level is, at year-end. Is it where you ended the third quarter? Is it lower? Is it higher? How do you think about inventory levels, for the TiO2 producers, given that others in the industry have announced production cuts? Frank, it's Jean. Look, we are taking action to reduce production in Q4. As you can imagine, a drop in sales of 25%-30% is more than what we had anticipated. We're not gonna reduce capacity as fast as the sales has turned down. We will continue to build inventory in Q4. Look, we'll probably build a little bit above what we consider normal, and that's why some of our free cash flow is ending up in working capital. We are working hard on 2023 to adjust that and go back to our normal inventory level. Look, we'll be very well positioned if something happens and the demand is more than what we expect and see at the moment. Understood. You know, you were able to realize a modest increase in price sequentially. I'm curious as to what your pricing outlook is for the Q4, and if you could offer any comments with respect to 2023. Yeah. Frank, this is John Romano. We don't provide specifics on price forecasts moving forward. Generically, you know, we did recognize price improvement in the third quarter. You know, as it's very well known, there was some movement in the Chinese pricing during the third quarter, which had an impact on our pricing even in the third quarter in some regions. Moving into the Q4, as I mentioned earlier, our pricing in, at this downturn, which we're in right now, will not be reflective of what we've seen historically. When we think about our numbers moving into the Q4, our pricing in the Q4 is not gonna be significantly different than what we had in the third quarter. Obviously, the negotiations are a little bit different, but we still have the ability to negotiate. We still have our margin stability agreements and a variety of other agreements that we have in place, you know, that are helping us manage our margin throughout this economic transition. You've also got the other impacts when we say the landscape's changed. Ilmenite prices haven't moved down. Sulfur prices are starting to move back up. So there's a lot of things along with all the other costs in the system which are gonna make it very difficult for pricing to move down significantly. That's why when we think about that recession case that we referred to during Investor Day, those elements of that to get to that recession number are still in place, and we're still confident in that. Oh, that's very helpful. You referenced Asian price and, you know, there was a thought that Chinese pricing, which had declined precipitously, was at or near a bottom. I'm wondering if you had any comments with respect to, you know, that being the case or not. Yeah. Look, that's a great question. When you think about the exports that I've. Go ahead. Did you have another question to follow up on that? No, it was just because, you know, some producers were operating at or below their variable costs of production. So I was just curious as to what your comment was there. Yeah, no, I mean, when you think about the exports out of China in the last three-four months, those have actually gone down while pricing was moving down significantly. I think it gave some visibility that price, not dissimilar to what we saw in the Q2 of 2020 when COVID hit and we saw this massive drop in TiO2 or TiO2 consumption. Our inventories went up. We slowed down production, but pricing remained flat. What we've seen as recently as in the last 48 hours is confirmation from eight-10 small to medium-sized Chinese TiO2 producers that have actually announced price increases. We do believe that, you know, where we are now, there is a significant gap, but costs aren't going to allow that to continue. We've already seen them start to move in the other direction. Thank you so much. Our next question of the day comes from Michael Leithead of Barclays. Michael, your line is now open. Morning, everyone. How sustainable are these monazite earnings that you're gonna be selling from stockpiled waste? I mean, can this continue for a while? Given it's transacted from waste, should we think about these revenues as nearly pure margin? That's a great question. Look, it all depends on selling these materials. Selling these materials is not brand new to us. You know, we've been selling monazite for several years, but what we've seen is that the margin from those sales has increased significantly over the course of the last 12 months. We are spending money that's coming from that additional revenue to reinvest in development opportunities on rare earth opportunities. It all depends on how quickly we sell that. You know, we produce out of Australia and South Africa. You know, if we sold it for over the 10-year period, you know, that would be somewhere in the range of 6,000-7,000 tons a year. That doesn't include what we're continuing to do, you know, we get through our tailings. There's that is one stream that we believe we'll continue to look at, also looking possibly downstream, in future. You know, as we move into a longer term strategy, we will also be looking at opportunities to move downstream. Okay. I guess on the inventory, right? We're talking about this replenish, and you're gonna build more. Days of sales and inventory are like 150 now. I mean, I know there's inflation feeding through that, but theoretically, that should be feeding through the sales number as well. Why did days sales inventory have to be as high? It seems like that should be pretty. Well, let me just make a quick point. I'm not sure where you get the 150 days, but our- It's all our feedstock. You're talking about total inventory. Total. Okay. Go ahead, Tim. No, that day sales inventory, as you mentioned, includes all of our feedstock throughout our vertical integration channel. As you look at our at each of those different components, which we manage as part of our global enterprise optimization, we're a bit high on feedstocks right now, as I mentioned earlier. As Jean mentioned, from a day's sales on finished goods, we're pretty much where we'd like to be from a seasonal norm standpoint, but by the end of the year, as Jean mentioned, we're gonna build a little bit of inventory. We'll continue to manage that with our production in Q1 and Q2 to make sure that our production is consistent with demand. While it's been a burn, we do not anticipate inventory to be a burn next year. I guess, Tim, if I can slide in then. What do we think for working capital unlock next year, I guess? If that's, you can comment on that. We'll be providing, you know, specific guidance and thoughts on 2023 as part of our call in February. At this point in time, we're not gonna be providing any specifics on 2023. Understood. Thank you. Our next question of the day comes from John McNulty of BMO Capital Markets. John, your line is now open. Yeah, thanks for taking my question. I guess one thing that seems a little bit confusing is the zircon markets tend to, you know, feed into the construction markets just like TiO2. They're obviously different products but are tied into the same end markets to some degree. Yet the pricing in zircon seems to be hanging in really well. Can you help us to understand why that is and if that's a sustainable level or if there may be some, you know, potential weakness going forward? Hey, John, it's Jean, and let John add if he wants to. It's really a supply-demand situation in the case of zircon. You have to remember that last year, the supply came, and it was very strong demand, and the supply came from inventory. This year, this inventory has completely disappear, and the demand, even if the demand is much lower this year than it was last year, the supply is still short of that demand. As I mentioned earlier in this call, building new mine takes five-10 years. In the case of zircon, there is no new mine that we're aware of, and that's why we haven't seen such an impact on zircon as we have on TiO2. You know, just one more maybe add on that, John. You know, we had an event that happened in South Africa here recently where the port went on strike. We ship a lot of material out of that port in containers to our customers. You get a real good idea of what inventories are when something like that happens, when we start delaying orders. I think that's one good indicator of where inventories are in the system. The other one, as we mentioned in the last call, our percentage of sales in China is not reflective of what the market is. We spent a fair amount of time during that period where we destocked significantly optimizing our supply chain and our customer base to de-emphasize China and focus more on other regions of the world. Although China has moved down, when we see a volume impact where we're maybe losing some sales in the China market, we had plenty of opportunities to displace those in other regions and other markets. The only thing I would add, John, is the inventory build that I had spoken about does not include zircon. We've actually depleted zircon inventory every quarter for the last four to five quarters. In fact, our zircon inventory levels are at the lowest levels that I've seen in the six years I've been here. Wow. Okay. No, that's helpful. I guess the other question is just and I guess a lot of the questions have kind of gotten to this, but when you know, when we look back earlier this year, the story was inventories in TiO2 were tight across the board at the consumer level, the producer level, you name it. You know, fast-forward a quarter to a quarter and a half, and we have two of the biggest producers saying we have to cut production by 25%-30% in the quarter. I guess where was the inventory essentially hidden, if you will? Like, was it on the TiO2 front? Was it on the end product, whether it's paint or plastics front? I guess, where would you say the surprise is coming from for all of you? 'Cause it seems like, you know, this was something, you know, that kind of snuck up on us, and yet it's the magnitude is pretty big. Just maybe a quick comment on that from the standpoint of, I don't think it snuck up on us, but there was a lot of it caught up in the supply chain, right? We've been talking about supply chain issues for the last 12 months with regards to shipments being delayed, so there could have been some buildup from inventory moving across the water. I know we had that issue specifically. More specific to our customers, it's our opinion that a lot of what is happening, costs have gone up, so people are seeing demand drop. The reason we're confident that this downturn is a short-lived event is because there isn't as much inventory in the system as there was before. What I think caught up with us a bit sooner was the speed with which the demand would slow down. It did drop significantly. That's been significantly exacerbated by destocking, which we don't think will last beyond the end of the year in any significant amount. Yeah, John, to us, it's absolutely unsustainable what's happening in Q4 at the moment. Again, we're seeing the impacts of that based on order patterns already, and that's why when we mentioned, you know, I think Hassan made the reference to the 140-170 range in EBITDA. It depends if we see a pickup between now and then. Got it. Okay, fair enough. Appreciate the color. Our next question is from the line of Jeff Zekauskas of JP Morgan. Jeff, your line is now open. Thanks very much. If your volumes are down sequentially 20%-25%, I think year over year, maybe they in the Q4 would be down 30% or 35%. When you look at that kind of volume decrease by geography, you know, how does it look? How is Europe different from Asia, different from North America on that basis? Hey, Jeff. That's good. Thanks for the question. This is John. As we mentioned, I'll start with North America. North America, we've seen some slowdown. We think that's more obviously there is some destocking there. We do believe that there's some seasonal adjustments. You have to remember, in that particular market, a lot of what we sell goes in the form of pre-dispersed TiO2 or slurry, so we have a bit more visibility on what those inventories are. We don't think it's been that significant in the U.S. As I mentioned earlier, the APAC market was where we saw it first. You saw a lot of the exports moving out of Asia Pacific into the European market. I'd say Europe, Middle East are the and Asia Pacific is where we saw the most significant downturn. You had Korea as a really good market for us. We had some months where exports, our sales into Korea almost went to nothing. There's a variety of things that I think are impacting that, but it's Asia Pacific, Europe, Middle East, and Africa is where we saw it most significantly. I'd say next would be Latin America, and North America still remains. I'd say, reasonably strong. Just to take a step back, I mean, my recollection is that Chinese TiO2 exports this year are up, I don't know, 160,000 or 170,000 tons. You know, is it the case that you guys are getting displaced by the excess Chinese shipments in a soft market? Well, they are definitely up year to date if you compare a trailing 12-month. As I mentioned previously, they're down the last 3-4 quarters. Look, you know, we compete with the Chinese, and the Chinese have a model around raising prices extremely high when the market's tight, and they come in and lower pricing when the volumes go the other direction. We talk about margin stability agreements. Not every one of our customers has those. Not every one of our customers, you know, some of them like volatility. So is there some customers out there right now that are displacing, you know, higher priced TiO2 with lower priced Chinese TiO2? The answer to that is yes. We don't think that's a significant amount of our volume. We have good relationships and understand our contracts that aren't only margin stability, but they're volume-based, and as we mentioned previously, loyalty rebate based. There's some of that going on, but we also don't believe it's sustainable. I mean, at the end of the day, this is what you just described is a normal process when you get into some sort of economic transition. Okay. Just, you know, for my last question. You know what you said was, you know, the Q4 would be some kind of trough. I get that. What about the Q1 of 2023? Like, instead of being down 35%, are we going to be down 20%? Or like, what's your read on the volatility of demand? You know, I understand that it, you know, the Q4 is a trough, but, you know, do we go back to flat volumes, you know, year-over-year in the Q1 or down 10% or down 20%? Like, I'm not asking you for a forecast. I just wanna know, like, what's your general feel for, you know, where demand is going to be? Jeff, this is a great question. What we're doing at the moment is we're using our playbook for a recession case. We feel confident that it's not gonna be. Well, we'd like it to be a great year from a volume point of view, but that's not what we're anticipating at the moment. We're adjusting our production globally from our mine to our pigment plant for a recession case scenario. I guess that what we have shared at Investor Day with the different debt scenario that we had is probably our best view of 2023 at the moment. When we think about that, you know, specific to your question, what do we expect in the Q1? We do expect the Q1 numbers to be up because there was, as we defined, a significant destocking event. You know, we got a variety of different models. When we were going through the COVID process, we had a V shape, a U shape. There was all kinds of different scenarios that we're factoring into what we would see as demand recovers. You know, when we look into where we are today, Q4 is a very significant move on the downside. We gave you a number of 25%-30%. We don't expect it to be down that same range moving into the Q1. I'd say it's just everything is moving relatively quickly. It's a bit hard for us to actually give you a firm estimate on what we think the Q1 is gonna be at this particular stage. We definitely think it's going to start moving up. It won't move up, I think, at the rate of COVID, because COVID was kind of a start and stop, but we do think it'll work its way up. I don't think we're gonna get back to the early COVID days either, because there was a tremendous amount of stimulus money that went into the economy, and people weren't traveling, they weren't going out to eat. They were staying home and reinvesting in their homes. We believe we'll return to more of a normalized basis, but it's hard to give you a specific on what we think Q1 is gonna be at this particular time. Jeff, when we talked at Investor Day, you know, we talked about our recession case with demand down, you know, approximately 10%. So that's what we would anticipate. The 25%-30% is not going to repeat. That's a Q4 item. By definition, Q1's gotta be better. Okay, great. Thanks very much. Our next question comes from Vincent Andrews of Morgan Stanley. Vincent, please go ahead. Hey, guys. This is William Tang on for Vincent. Thanks for taking my question. You guys are taking off 25%-30% of your capacity in the Q4, and you've talked about being 85% vertically integrated on the feedstock side. I'm wondering how much wiggle room do you have left before you might look at reducing some of those ore utilization rates? You know, if things recover even, you know, 5%-10% in the Q1, it sounds like you might still be long feedstock at that point. Will, it's JF. When we talk about the 25%-30%, it's sales, it's not production. Look, we did mention that we will continue to build inventory in Q4. We have, and we will continue to reduce our production, but we haven't reduced it at the 25%-30% level, and we don't plan to do it either because we don't believe that 25%-30% will stay. As Tim and John mentioned, we expect Q1 to move up in volume, and obviously we're gonna adjust 2023, not to build inventory and even probably reduce inventory in Q3. I hope that clarified the situation. Yeah. Look, just maybe a little bit more color on that. When you think, you know, wind back the clock 60 days ago, we mentioned we had different levels of inventory at the nine different facilities we have globally. You know, we were still having issues getting orders placed, and filled 60 days ago. What's happening is happening very quickly. To Jean's point, we're reacting to that, but we also want to be prepared for what we believe to be, as we've talked about, extensively on this call, a rebound as we move into the beginning of the year. Are we gonna be back to 2021, 2022 peak volumes quickly? No, but we're gonna migrate up moving into the Q1. We wanna be ready to make sure we have the ability to continue to service our customer needs. Gotcha. Okay. You mentioned sulfur and ilmenite kind of price trajectories earlier. Could you remind us of some of the cost assumptions in the recession case scenario you gave back in June? How do you see all the different inputs tracking as we exit 2022 versus kind of what you had factored into your model? Will, what we assumed in our recession case was a 2.5% drop in the ore and a 10% drop in energy. We've not yet seen either one of those in our overall assumptions, which is one of the reasons you know from our perspective you know prices in the industry continue to be firm. We'll see how that goes as next year unfolds. Got it. Thank you. As a reminder, if you would like to ask a question, please dial star one on your telephone keypad now. Our next question is from the line of Michael Leithead of Barclays. Michael, your line is now open. Great. Thanks. Good morning, guys. First, I just wanted to get back to an earlier question, and I fully appreciate it's too early to talk 2023, but usually working capital is, I don't know, ±$100 million, give or take. This year it's over a $200 million use, which is like 10% of your current market cap today. Is it fair to roughly assume you get at least half of that back next year or no? Working capital should be a source of cash for us next year. The absolute amounts, you know, we'll be more specific about as part of our year-end call. Just two on the rare earth side. First is where primarily is your monazite supply geographically? Is that in South Africa? Two, as you mentioned, kind of increased commercial value or interest in these products, can you supply your customers from your existing byproduct streams as is? Or do you need to invest in some sort of upgrading or separation process to kind of ramp that up from here? Mike, two things. First, it comes from South Africa and Australia. That's where our mines are. We have two sources and, you know, we're not doing a significant amount of upgrading at this particular stage. What we're doing is selling what was historically a tailing. What we're doing now though is looking at how we can actually move downstream to look at opportunities to even significantly improve the revenue and the margin that we're getting through that. I mentioned earlier in the call that we had some development opportunities that we were looking at to move downstream. We're using the revenue and the margin that we're getting from those streams to invest in those opportunities. Right now they're development opportunities. We're early, I would say in the development of what we think can be a long-term, solid business for Tronox and the value of those streams. To answer your question specifically, we don't have to really do much to them right now, other than determine how we might change or step up in the value chain. Just Mike, to be a bit specific, for example, the tailing that John's talked about is sand that is a waste from cleaning the ilmenite and the zircon and the rutile. That's how we sell it today, just as a tailing. Separating that tailing to extract the monazite is exactly the same type of process that what we're doing to separate the zircon from the sand at the moment. It's an expertise that we have, and we're not doing it at the moment, but that would be very easy for us to move to clean that and obviously increase significantly the revenue from a very small step for us. As John said, we'll continue to explore and see if there's more that we can do and ramp up with the demand of the electrification of the world. It's not just our mining expertise, it's also our expertise in chemical producing. You know, the separation is one thing, but there's other steps that we can take as we continue to expand and develop the strategy on rare earths, which quite frankly could be a real upside for us. Great. Super helpful. Thanks guys. We have no further questions registered today, so it'd be my pleasure to hand back to Mr. Turgeon for any closing remarks. Thank you, Harry, and thank you for joining the call today. In summary, we remain focused on the lever within our control, prudently managing cash, executing against our strategy, driving operational excellence, and delivering on our key capital project to enhance our vertical integrated portfolio. Tronox remain well positioned to continue delivering on our commitment. That conclude the call. Have a great day. Thank you. Thank you for joining everyone. This concludes the Tronox Holdings Q3 2022 earnings call, and you may now disconnect your lines.