Q2 2023 Chemours Co Earnings Call

Participants

Brandon Ontjes; VP of FP&A and IR; The Chemours Company

Jonathan S. Lock; Section 16 Officer, Senior VP & CFO; The Chemours Company

Mark E. Newman; CEO, President & Director; The Chemours Company

Arun Shankar Viswanathan; Senior Equity Analyst; RBC Capital Markets, Research Division

Daniel Dalton Rizzo; Equity Analyst; Jefferies LLC, Research Division

James Patrick Cannon; Research Analyst; UBS Investment Bank, Research Division

Jeffrey John Zekauskas; Senior Analyst; JPMorgan Chase & Co, Research Division

John Ezekiel E. Roberts; Research Analyst; Crédit Suisse AG, Research Division

John Patrick McNulty; MD & Senior U.S. Chemicals Analyst; BMO Capital Markets Equity Research

Michael James Leithead; Research Analyst; Barclays Bank PLC, Research Division

Patrick Duffy Fischer; Research Analyst; Goldman Sachs Group, Inc., Research Division

Unidentified Analyst

Presentation

Operator

Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chemours Company Second Quarter Earnings Call. (Operator Instructions)
Brandon Ontjes, Vice President of FP&A and Investor Relations, you may begin your conference.

Brandon Ontjes

Thanks, Jeannie. Good morning, everybody. Welcome to the Chemours Company's Second Quarter 2023 Earnings Q&A Conference Call. I'm joined today by Mark Newman, President and Chief Executive Officer; and our recently appointed Senior Vice President and Chief Financial Officer, Jonathan Lock.
Before we start, I'd like to remind you that comments made on this call as well as in the supplemental information provided in our presentation and on our website contain forward-looking statements that involve risks and uncertainties as described in Chemours' SEC filings. These forward-looking statements are not guarantees of future performance. and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours undertakes no duty to update any forward-looking statements as a result of future developments of new information.
During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript plus our earnings deck have been posted to the Investor Relations section of our website along our earnings release. This morning's call will focus purely on Q&A.
With that, I'll turn the call over to our CEO, Mark Newman. Mark?

Mark E. Newman

Thank you, Brandon, and thank you all for joining us this morning. In addition to reporting solid results in the second quarter, as you saw from our press release, we had an active and productive quarter. In TSS, we had another record -- all-time record quarter and as you'll note, in the last 6 quarters, we've had 5 record quarters in TSS, which really speaks to the momentum and growth in this business.
In APM, we had another double-digit growth quarter in our Performance Solutions business, and we launched THE Mobility F.C. Membranes Company, which will be focused on Nafion membranes for the fuel cell requirements of the hydrogen economy.
In TT, we made the difficult decision to close our Kuan Yin facility. And I just want to take this moment to acknowledge the profound impact the closure will have on our dedicated and skilled colleagues who have been valuable members of our team in Taiwan. During this transition, consistent with the Chemours culture, we will remain fully committed to working with our local leaders to offer support and assistance in this difficult transition.
Additionally, as you saw, we reached a comprehensive settlement of PFAS-related drinking water claims of a defined class of U.S. public water systems. We also published our sixth sustainability report, which shows significant progress on both greenhouse gas and for organic compound emission reductions. On capital allocation, we agreed to the sale of our glycolic acid business which we expect to close this quarter. And we continue to return capital through dividend and stock repurchases to our shareholders.
It was also a quarter marked by a number of leadership changes. So on April 1, Denise Dignam became the President of our Titanium Technologies business. In early June, we had Jonathan Lock appointed to the CFO role, and obviously, Brandon Ontjes stepping up into the Investor Relations slot. Matt Abbott became our Chief Enterprise Transformation Officer at the same time. And then earlier this week, we announced Joe Martinko as the President of our Thermal & Specialized Solutions business. So when I look at all the changes, including Gerardo Familiar being named earlier this year behind Denise going into TT, we've had a number of leadership changes, which really speaks to the strength of the talent on the Chemours bench and how well we're developing diverse and capable leaders of the future.
As I think of the quarter in total, I think it's a real demonstration of the Chemours brand of Courageous Chemistry. We did not miss a beat despite the leadership changes and we got a lot done. And as we face a weaker second half this year, the team is full of energy and energized to drive continued great performance and to deliver value to our shareholders from our 5 strategic priorities.
So with that, Jeannie, let's go to Q&A.

Question and Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Arun Viswanathan from RBC Markets.

Arun Shankar Viswanathan

Can I just ask about the TiO2 plant closure? Is that plant may be at the upper end of the cost curve? And maybe you can speak to the regional dynamics that led to that decision.

Mark E. Newman

Thanks for your question. Yes, as I said in my opening, this was a really difficult decision for us given the impact on our Chemours colleagues. But as we look at where that plant and other plants are on the cost curve, it has been since day 1 designed to be more of a high-grade ore plant than what's more traditional in our North American facilities where we can use a broad spectrum of ore. So yes, historically, great performance on uptime and safety metrics at that plant and productivity. But by design, a high-grade ore plant which in -- with some of the cost escalation we've seen in recent years, makes it more difficult.
It has historically been a swing facility within the circuit. So by taking this plant out, we get really 2 benefits. We fully task the circuit. We move from a variable cost perspective to more low-grade ore usage. And as you saw in our materials, we expect our run-rate cost reduction of about $50 million next year.

Arun Shankar Viswanathan

And then if I could, as a follow-up, you noted some challenges in the second half. Could you just elaborate on that? Is that TiO2 volume weakness and then maybe some weakness as well in the advanced materials part of APM? Or yes, can you just flush that out?

Mark E. Newman

So after really a very robust recovery post-COVID in 2020, and several quarters of very strong demand, when we plan this year, we expected a more gradual recovery. We know early in the year, others were thinking of a very robust recovery, especially in China post-COVID. And so we've always been of the mindset that we were going to have a gradual recovery. I think as we're getting into the second half, our view is that versus our planning, we expect more modest demand recovery and maybe being pushed even into early 2024. So our expectations here sitting today is that in the second half, we would see volumes versus the first half flat to slightly up. And obviously, seasonally, Q3 and Q4, Q4 especially tend to be weaker quarter. So I would say we expect to see flat to slightly up despite the fact that the second half seasonally is typically weaker.

Operator

Your next question comes from the line of Josh Spector with UBS.

James Patrick Cannon

This is James Cannon on for Josh. Just hitting on the Taiwan plant, again, just wondering if that has any impact on your mix of contracts. And as you continue to talk about changing and improving the quality of that business, is there anything that you're doing to think about changing the structures you have in place?

Mark E. Newman

No impact on our contracted business at all. The way we have looked at this decision is can we serve our customer needs well going forward from our North American plants, and we've concluded we can. So this is not -- there's really no -- this is just a change in manufacturing, not a change in contracts.
As you saw in the quarter, we pursued more opportunities in both our flex and distribution channels, which led to sequential growth in volumes as well. So I'll maybe ask Jonathan to comment more here on this in terms of how we see the dynamic here in the marketplace with respect to volumes.

Jonathan S. Lock

Yes. Obviously, as Mark said, in the second quarter, you could see the sequential growth in volumes of approximately 13%. While it's a good result sequentially coming into the first quarter, it's not necessarily in line with what we would call a recovery. And so as we look out into the third and the fourth quarter, the second half, that causes us to take the glide path down slightly, right, from the recovery we were expecting.
But all in all, no change, James, to your question to kind of our approach to the market. We've been talking about our ability to debottleneck our facilities over the past couple of years. Obviously, that was delayed inside of COVID as a result of COVID. But we're confident that through this transition, we won't miss a beat in terms of our ability to serve our customers, both in the AP region and globally.

James Patrick Cannon

Got it. And just wanted to say congratulations to you, Jonathan. I had one other follow-up on the TiO2 business. And that's just if I think about volumes being relatively stable through the rest of the year, does your guidance anticipate any raw material benefit?

Mark E. Newman

So clearly, we're seeing some moderation in raw material costs. Some are more sticky than others. And obviously, as we retask our remaining plants in TT, that gives us an opportunity also to run at better utilization rate. So my view is we continue to work very hard, our procurement team, on input costs. Clearly, energy costs have come down, or as we have said earlier this year, has been moderating. And then our ore mix is advantaged by the decision we've made with respect to Kuan Yin.

Operator

Your next question comes from the line of Duffy Fischer with Goldman Sachs.

Patrick Duffy Fischer

First question is just around the PFAS potential settlement. We've all seen a number of state AGs have kind of stood up against the 3M settlement. Would you expect something similar for your settlement where there would be people that prominent that would try to either alter it or kill it? And if not, can yours go forward do you think with the judge if the 3M's doesn't?

Jonathan S. Lock

No, listen, we saw the news of the AG opposition to 3M settlement. Obviously, when you're dealing with something this complex and this far-reaching, I think we would certainly expect folks to have an opinion, right, on how they think the -- what they think the outcome should be. Sitting here today, we can't predict whether or not similar objections would be raised against our settlement or not. But I think that what we do have confidence in is that the settlement that we entered into based on what the plaintiffs have asked is a very good settlement. And I think that, that opinion has been reinforced by the court, right, that they believe that this is a good settlement. So we're going to continue to do what's asked of us by the court, certainly, and work through the process first through preliminary approval and then ultimately, right through final approval at the end.

Patrick Duffy Fischer

Great. And then if we could turn to refrigerants, can you just update us on your latest thinking with the step-down, particularly in North America with HFO? What do you think that does to pull forward volumes the rest of this year? And then can we still grow those volumes into next year with the step-down? And what are we seeing on supporting HFC pricing as we're moving into that step-down for HFC?

Mark E. Newman

So Duffy, I'll ask Jonathan to comment further. But generally speaking, as we look at the second half, we think -- we believe that the step-down is beneficial to our second half. Clearly, remember that this business has a seasonally weaker especially going into Q4. So bear that in mind as well. And obviously, we've had a very robust first half on OEM bill rates. The question is, does that continue in the second half? And with weaker construction, that's also a moderating impact.
So listen, I think it's beneficial to TSS with a step-down in terms of folks wanting to make sure they've utilized their quota. Clearly, with end demand being more modest in a somewhat weaker economy in the second half, that could have an offsetting impact. But net-net, we factored that into our guide.

Jonathan S. Lock

Duffy, I'll just build on that comment and just remind folks on the call that the AIM step-down coming is 30%, and the F-Gas step-down coming in Europe is 20%. So that's obviously a 2024 dynamic that we're going to face into. And I know that Joe and his entire team are ready to serve the market to make sure that our OEM equipment customers get all of the products that they need to build out their fleet and to deliver that next generation of HFO hardware and to make sure that our distribution partners on the refill side are well taken care of through that coming transition.
Just to be sure, as we think about the guidance for the full -- the revised guidance for the full year, we haven't really baked in a material amount of pull forward, right? So we're not envisioning a scenario sitting here today where you get a material amount of pull forward in either the third or the fourth quarter. Obviously, the things that are going to drive that, right, through the summer and into the fall are going to be how hot is it? How much of an inventory depletion do we see down the channel? And of course, what is the strength of the overall economy? That give folks the confidence to say, hey, I'm going to pull ahead some volume into '24. So listen, I mean, with this business continues to perform very well and obviously, with the coming '24 step-down, as you all know, we'll be ready to serve the refrigerant markets that need the product.

Mark E. Newman

And maybe just one last comment, Duffy. Obviously, the step-down in quota drives further adoption of HFO technology. We're hard at work at our Corpus Christi site to drive the 40% expansion there, which we expect to have completed by the end of next year.

Operator

Your next question comes from the line of John McNulty from BMO.

John Patrick McNulty

So in the TiO2 business, you seem to have some real confidence that demand picks up. Is that coming from your customers? Like I know you've got these longer-term contracts with customers, so you maybe have a little bit better peak behind the curve in terms of what they're thinking the real demand pull is like. So is it coming from that? Or is it more just, look, we can't run at this low of a level for that long, there's just not that much inventory to realistically destock? I guess, how would you characterize your confidence on it?

Mark E. Newman

Yes. So John, as I said earlier, we had several quarters of very robust demand before things started to soften last year in Q3 and really much more so in Q4. Our view typically is a typical TiO2 cycle is somewhere between 12 and 18 months. So obviously, this one feels like it's more towards 18 than 12. And as you've seen recently by some of the commentary by some of the U.S. coating companies, I think it's been a lot more favorable than it has been previously.
So again, our view is, hey, this is taking a little longer. Yes, we continue to have a robust book of contracted business and really very active dialogue with key customers around the world, including the folks I've mentioned earlier here in the U.S.
Jonathan, I don't know if you have any additional color.

Jonathan S. Lock

Yes. No. I mean the only thing I'd add to that is that I think coming into the year, we thought that we would find the bottom kind of here early in the first half, and the order book would speak to a turn in the second half. And that hasn't been the experience that we've had here in the second quarter. I think we continue to look out at the order book and feel like we're at the bottom, but the inflection is not turning. We're at the inflection point, but it's not turning as hard.
As we think about what could happen next year in '24, we're not here to give a '24 guide. But certainly, the North American northern hemisphere coating season in 2024 is what we're all playing for in terms of when we think the restock happens. It's just difficult for us to sit here today and think that ultimate end-market demand has really declined in line with how we've seen the destock, right? So what we're trying to do right now in the very near term, as evidenced by what we're doing with our manufacturing circuit is to reduce cost and improve our overall circuit utilization so that we're well set up for 2024.

John Patrick McNulty

Got it. Okay. No, that's helpful. And then I guess just on the TSS business. So kind of a look at like the cooling degree data and that type of thing, would actually say 2Q despite all the press about the hottest day in the world and all that kind of stuff, it was actually kind of a light start to the air conditioning season. But it looks like the 3Q has really ramped up aggressively. Do you feel that pull? Like is it something that -- I hesitate to say it's spot because that almost implies it's a commodity, but like do you feel that pull when it gets hotter? And I guess, how should we think about how that plays out if the current trends continue throughout the rest of this year?

Mark E. Newman

Yes. So John, as you alluded to, we had a relatively cool first part of the summer, which delayed the start of the season. And obviously, with the more recent warm weather, we will see higher utilization rates or higher consumption of refrigerants as folks need to service their equipment to deal with the current weather patterns we're seeing, especially here in the U.S. and Europe. And so our view has always been that any pull ahead related to the step-down would come later in the year, dependent on how much quota folks had used throughout the year.
A lot of the refrigerant products -- what's really great about our TSS business is that a significant portion of it is a replacement or a service business. And so there's not a lot of transparency in terms of where distributors are in terms of consumption of inventory. And so we -- yes, it creates demand when you have hot days like we're seeing recently. But there's also quite a bit of inventory in the system held by distributors. And there's typically not a lot of line of sight as to where that inventory level is and whether folks will need to consume more to use up their quota.
So as we reflected on the second half, we believe there will be some pull ahead as it relates to the step-down. Folks will want to make sure they've used their quota. But a lot depends on utilization through the end of the year, especially through the cooling season this summer, and we'll just kind of have to watch it as we go.

Operator

Your next question comes from the line of Matthew DeYoe of Bank of America.

Unidentified Analyst

This is (inaudible) filling in for Matt. The first question I want to ask is a little bit longer term, but there's been a lot of press about the emerging cooling for data centers and how this could benefit companies like Chemours. What are you seeing there? And how far are we from this actually being a decent business for your company?

Mark E. Newman

Yes. So it's a great question. So we continue to work very diligently on developing and commercializing immersion cooling. We had talked about this several months ago in one of our investor updates on our Thermal & Specialized Solutions business. And as we look at the explosion in AI and the need for high-speed data and data centers, we're very excited about what this technology will offer. We'll have more to say in the future in terms of an official announcement. But I remain confident that immersion cooling present another significant growth franchise for our Thermal & Specialized Solutions. And in a very direct way, we'll tie to the growth of AI in the U.S. especially and around the world.
So more to come on that, but we remain confident that this is a technology that we can commercialize. Probably not in the immediate future, but certainly something that will be part of our planning as we look out between here and certainly the middle of the decade.

Unidentified Analyst

Okay. Perfect. And I also wanted to ask a little bit about illegal refrigerant imports. There have been some articles and some mentions by the American HFC Coalition about a high amount of R-401B refrigerant coming to the U.S. from China. And I don't believe it was an issue for your second quarter results, but is it something that you're concerned about in the second half of the year?

Jonathan S. Lock

Yes. So I -- it's Jonathan. As we think about illegal imports, we learned a lot of lessons out of Europe, right? So as we were launching HFO technology in Europe on the stationary side, specifically, we learned a lot of lessons from the illegal imports that came across from Eastern Europe and Southern Europe and changed the quota dynamic in that market. So we took a lot of those learnings around inventory management, border control checks and working with authorities and layered that into our approach to the U.S. market and worked a lot with EPA and a number -- Homeland Security and a number of other agencies in order to make sure that as AIM was getting stood up. We had some of the right enforcement mechanisms in place, and we created some awareness right around the issue. So obviously, we need to remain vigilant on illegal imports. It's not something we're ever going to take our eyes off of.
To your question specifically about 410B, we wouldn't necessarily view that as an illegal import issue, but more of a composition of product issue and the importation of that being used to kind of to skirt other regulations around the import of 410A. So our teams are all over this. Joe and his entire team, they work hand-in-hand with federal, state and local authorities here in the U.S. to ensure that there isn't a problem going forward. So we'll keep an eye on it. But for now, we remain confident that the law can be well enforced here in the U.S.

Operator

Your next question comes from the line of Laurence Alexander with Jefferies.

Daniel Dalton Rizzo

This is Dan Rizzo on for Laurence. Given what you've done with the TiO2 plant, are there other facilities you're taking a look at that might be higher costs that might be shut down?

Mark E. Newman

No, not at this time. And obviously, our expectation would be all of our remaining facilities utilize low-grade ores and a wide spectrum of ores, which improves their cost competitiveness. So not at all.

Daniel Dalton Rizzo

And then -- so have you stated what the utilization rate is now for TiO2 post the closing of this facility?

Mark E. Newman

No, we haven't. We tend -- we typically update our nameplate capacity in our 10-K disclosures once a year. The way I think you should think about this is the immediate impact of the Kuan Yin closure will obviously reduce our nameplate capacity. And -- but we continue to work on debottlenecking of our remaining facilities such that I would expect, over time, the change in our nameplate capacity to be quite modest. So the immediate impact, obviously, is both a fixed cost reduction and a better utilization of our circuit but again, part of our analysis in making this tough decision was looking ahead to customer demand and being confident that with some of the work underway to debottleneck our 3 facilities here in North America that we could serve our customers well.

Daniel Dalton Rizzo

And last question, if the coatings season next year is strong or stronger than expected, I guess you could easily flex up to meet any anticipated demand surge.

Mark E. Newman

Yes, sir. And obviously, as Jonathan said, we really wanted to take advantage of the continued weak demand to get our manufacturing footprint right in anticipation of a more robust 2024 so that, a, we can serve our customers well. And obviously, from a profitability perspective, we would get our TiO2 business back into sort of the 20% to 25% EBITDA range. So again, we're thinking ahead to 2024 and how we serve that market well.

Operator

Your next question comes from the line of Mike Leithead from Barclays.

Michael James Leithead

First question on APM. Could you maybe drill down into what areas you're seeing the demand weakness in the second half? And then separately, could you just update us on how you're seeing demand specifically developed for Nafion and your semicon PFA currently?

Mark E. Newman

Yes, Mike, that's a great question. Remember, we've always described 2023 as a transition year for APM. What do we mean by that? We're really ramping up our ability to our capacity in our Performance Solutions space to serve both clean energy and advanced electronics markets. And so in terms of where we're seeing weakness, it's in our Advanced Materials business, think of that as either broad industrial or in some specific segments like land cables, which are tied to construction, we're seeing some weakness there as well. So I'd say, generally speaking, the weakness we're seeing is in our Advanced Materials business.
On our Performance Solutions business, we remain sold out. And so what we're witnessing is our growth rate here this year is really capped by how much capacity we can liberate. So as we look at the second half, we expect Advanced Materials to be weaker from a volume perspective. And obviously, there's only so much you can do in the second half to relieve capacity. And that's just the timing it takes to implement capital projects or, in some cases, to get permits to expand at some facilities.
So the team is really hard at work in doing everything possible to maximize throughput in our Performance Solutions area, but there's just practical limits in what we can achieve in the second half, while we're seeing a weakening of the Advanced Materials, which today is the larger portion of the total revenue of that business.
Jonathan, I don't know if you have any additional color.

Jonathan S. Lock

Yes. No, the only other thing I'd add is that, obviously, if you look at APM, like as a business, regionally, our exposure to Asia Pacific is high, right? It's 35%, 40% of the overall business. And so as we think about that and the kind of the lack of a strong recovery in China and whatever kind of spread that has to the rest of Asia that's certainly impacting the business.
The only other thing I'd remind folks on the call is that Q3 of 2022 is going to be a tough comp, right, for Q3 of 2023. So as we look ahead, we do expect a drop off there on a year-over-year basis in addition to something that's going to happen sequentially in terms of both top line and bottom line.

Michael James Leithead

Great. That's super helpful. And then just second on TiO2. Could you maybe talk about your pricing assumptions as we go into the second half? And second, I think you previously talked about getting the business back to about 20% EBITDA margins to exit the year. Where do you think the bar is now just given all the moving pieces we're seeing here?

Mark E. Newman

Yes. We don't provide pricing guidance on a forward-looking basis. As you saw in the recent quarter, our price was down 1%. And so that reflects both regional and customer mix that also reflects channel mix with more volume, relatively speaking, going through flex and distribution. So again, our view is the second half, we've guided that volume, we expect, to be flat to slightly up. We're clearly working on rationalizing capacity, which will be beneficial starting in the second half, but really will show real benefit as we go into 2024.

Operator

Your next question comes from the line of John Roberts with Crédit Suisse.

John Ezekiel E. Roberts

Two questions. First, the short one, do you plan to do a debt offering to fund your share of the PFA settlement? And then the longer question is, how do you reoptimize the TiO2 network? Do you have some -- you mentioned it's swing plant. So do you have some exports into Europe that you can serve from North America now? And do you just drop your customers in Asia?

Jonathan S. Lock

Yes. John, it's Jonathan here. On your question about the financing, we're obviously always looking at different mechanisms to drive liquidity here. Obviously, we have the sale of the glycolic acid business, which we project will close at the end of the month. So we're always looking at liquidity to make sure that our balance sheet is in order. Today, we feel good about the capital structure that we have, the go-forward liquidity of the business. So we'll approach that opportunistically. Obviously, we have the 2025 term loan B, I think that's what you're referring to kind of the 2 term loans in front of us. So we'll continue to take a look at that. And if there's an open window, maybe think about doing something there.

Mark E. Newman

And then, John, on the question with respect to our TiO2 facilities No, we don't plan to drop "any customers." We're very focused on very high levels of customer service. And today, actually, we leverage all of our plans to serve our customers' needs globally. Clearly, we'll have to readjust in terms of what plants are tasked with specific customer requirements. But that's something the team is very capable and has done before. So I don't expect any meaningful interruption here in terms of customer service or meeting customer requirements as a result of this decision.

Operator

Your next question comes from the line of Jeff Zekauskas with JPMorgan.

Jeffrey John Zekauskas

I've always thought that the capacity of the Taiwan plant was 160,000 tons. Is that right? And you've talked about the cost savings from closing the plant. Is the plant making any money? Or is it losing money? What's the trade-off there?

Mark E. Newman

Yes, Jeff, you've asked 2 questions that we probably wouldn't answer in the sense of we don't disclose individual plant capacities. And we certainly don't report out other than at the segment level our profitability. As I mentioned, it is a higher-cost plant in our fleet because of its use of high-grade ore, and therefore, the benefits of the closure is to more fully test the remaining plants and to reduce our dependence on high-grade ore. So I think those together will have meaningful benefit as we've disclosed, it's a $50 million run rate cost savings, again, which we would expect to start to see in a pro-rata form in the second half here, but obviously, on a run rate basis starting next year.

Jeffrey John Zekauskas

So is the $50 million a net cost savings? Is that net or there's an...

Mark E. Newman

Yes, sir. That's the net cost savings.

Jonathan S. Lock

It's a net cost savings on the EBITDA, Jeff. And then obviously, as we disclosed in our press release and in our materials, there will be a $25 million cash impact here in '23 and a similar number in 2024 in order to effectuate those. Those are cash -- costs associated with things like severance.

Jeffrey John Zekauskas

Okay. And for my follow-up, imports of titanium dioxide into China as of about August last year fell off a cliff. That is maybe imports into China or something like 15,000 tonnes a month and they fell to, I don't know, 4,000 tonnes a month, and they've stayed low since that time. Is that something which affected your decision, that is China now being more supplied by TiO2 companies in China? And secondly, in your comments, you said that the subsequent cost savings will be substantial in closing the plant. What is that about? That is, is there a cost savings that's above that $50 million starting in '24 that's meaningfully above?

Mark E. Newman

So Jeff, clearly, there is a fixed cost savings by eliminating a plant. Obviously, there will be a continued focus on optimizing the remaining circuit. And obviously, the remaining circuit will use a wider variety of ores. But what we've disclosed for now is the fixed cost savings, which we believe we will achieve as a result of that.
Just a comment on China. Again, I think there was a lot of euphoria earlier this year with the change in COVID-19 and the expectation that the China economy would come roaring back, and obviously, that hasn't happened. High-grade pigments into China are tied to some degree on high-end local consumption, but a lot to do with exports from China in things like furniture and other durable goods which have also been down.
So our view is high-grade imports into China are not necessarily being substituted by Chinese producers but are being -- the demand is being impacted by where those products go into in terms of high-end furniture and laminates for export, which are also down, tied to both a weaker economy in Europe and weaker construction in North America.

Operator

There are no further questions at this time. Mark Newman, I turn the call back over to you.

Mark E. Newman

Jeannie, thank you, and thanks, everyone, for your interest. Again, we continue to be very active in terms of driving our 5 key strategic priorities. And I just really want to take this opportunity to thank our entire team of employees who are passionate and focused about moving the company forward. So thanks again, and we'll look forward to catching up with some of you on the road.

Operator

This concludes today's call. You may now disconnect.