The document discusses cost savings opportunities in titanium dioxide procurement. It finds that actual cost savings of $42 million were higher than the estimated $18 million savings by shifting procurement to lower-cost countries. Regional cost structures vary significantly, with feedstock costs accounting for 10-57% of total costs depending on the production process and location. The document advises buyers to invest in understanding detailed cost structures and leverage current market conditions to improve negotiation positions and maximize savings.

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4. TiO2

5. Observation On Estimated and Actual Cost
Savings
Insights on Costing and Profitability of TiO2
When To Negotiate ?
5

6. Price Trend USD /MT
2010
2012
2011
2013
2014
1
LCCS Prices
International Prices
6

7. 260
270
280
290
300
310
320
330
Total Initial Spend Spend After Shifting
Base
Million USD
Estimated
Savings
325.11
283.11
0
5
10
15
20
25
30
35
40
45
Estimated Saving Actual Savings
Million USD
REALITY
18.00
42.00
Potential 15%-42 Mil. USD Cost Savings By
Shifting Procurement Base to LCCS.
7

8. HOW DID THAT HAPPEN ?

9. Procurement Procedure
2
Lab Trial of Sample
3
Plant Trial
4
Placement of Order
1
Request of Sample
5
Bill of Lading
6
100% Wire Transfer
9
20%
Unusable
40%
Perfect Conformance to Buyer Specification
40%
JUST Useable without great loss of FINAL PRODUCT quality
Shipment at Buyer’s End

10. 1 Disperse technical personnel at suppliers site
3 Oversee TiO2 weight and packaging quality
4 Issue certificate prior to payment
2 Monitor aspects of pre-paid TiO2 procurement
10
Inspection Costs –
Of
~20,000 USD Annually

11. 0
5
10
15
20
25
30
35
40
45
Estimated Saving
Actual Savings
Potential Savings
Million USD
11
42.00
18.00
41.98

12. 2
12
Can you Save More ??!?

13. Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
Recent
Past
% of Feedstock Costs in Total Costs
~27%
~34%
~31%
~36%
~44%
13

14. Generic Cost Structure
0%
100%
Feedstock
Fixed Costs
Utilities
Process
Chemicals
Waste
Treatment
% of Total Cost
23%
16%
14%
2%
45%
Challenge
Buyer’s lack of knowledge on detailed TiO2 costing aspects
thus, Lower negotiation power with Suppliers
14

15. 15
Known
Generic
Cost
Structure
Unknown
Region Specific Cost Structure
Cost Aspects to Focus During Negotations
Cost Aspects to Avoid During Negotations
VS

16. TiO2 Cost Structure Comparison Generic Vs. China
0%
100%
Generalised Cost Structure
China Sulphate Process - High
TiO2 Blend
China Sulphate Process - Low
TiO2 Blend
% of Total Production COst
45%
14%
23%
16%
20%
18%
10%
28%
14%
15%
18%
22%
1%
2%
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
16
20-30%
Cost Advantage

17. TiO2 Cost Structure Comparison Generic Vs. China
0%
100%
Generalised Cost Structure
China Sulphate Process - High
TiO2 Blend
China Sulphate Process - Low
TiO2 Blend
% of Total Production COst
45%
14%
23%
16%
20%
18%
10%
28%
14%
15%
18%
22%
1%
2%
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
17
20-30%
Cost Advantage
Negotiation Lever
Feedstock Costs

18. TiO2 Cost Structure Comparison Generic Vs. North America
0%
100%
Generalised Cost Structure
NA Chloride Process - High TiO2
Blend
NA Chloride Process - Low TiO2
Blend
% of Total Production COst
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
45%
14%
23%
16%
2%
57%
11%
20%
4%
8%
54%
15%
20%
9%
2%
18

19. TiO2 Cost Structure Comparison Generic Vs. North America
0%
100%
Generalised Cost Structure
NA Chloride Process - High TiO2
Blend
NA Chloride Process - Low TiO2
Blend
% of Total Production COst
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
45%
14%
23%
16%
2%
57%
11%
20%
4%
8%
54%
15%
20%
9%
2%
19
Negotiation Levers
Utilities, Process Chemicals

20. TiO2 Cost Structure Comparison Generic Vs. Europe
0%
100%
Generalised Cost Structure
Eu Chloride Process - High TiO2
Blend
Eu Sulphate Process - High TiO2
Blend
% of Total Production COst
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
45%
14%
23%
16%
2%
7%
20%
9%
61%
10%
20%
14%
54%
3%
2%
20

21. TiO2 Cost Structure Comparison Generic Vs. Europe
0%
100%
Generalised Cost Structure
Eu Chloride Process - High TiO2
Blend
Eu Sulphate Process - High TiO2
Blend
% of Total Production COst
Feedstock
Process Chemicals
Fixed Costs
Waste Treatment
Utilities
45%
14%
23%
16%
2%
7%
20%
9%
61%
10%
20%
14%
54%
3%
2%
21
Negotiation Levers
Utilities, Process Chemicals

22. Plant Profitability
•Region - Specific
•Capacity - Specific
22

23. High
Medium
Capacity Index
Low
~100-250 KT
~40-90 KT
~10-25 KT



Plant Capacity:

Avg. Operating Rate:
80%
Profitability Index:
55%
Plant Capacity:

Avg. Operating Rate:
59%
Profitability Index:
38%
Plant Capacity:

Avg. Operating Rate:
63%
Profitability Index:
10%
North America
23

24. Plant Capacity:

Avg. Operating Rate:
84%
Profitability Index:
49%
Plant Capacity:

Avg. Operating Rate:
73%
Profitability Index:
28%
Europe
24
High
Medium
Capacity Index
Low
~100-250 KT
~40-90 KT
~10-25 KT




25. Plant Capacity:

Avg. Operating Rate:
90%
Profitability Index:
42%
Plant Capacity:

Avg. Operating Rate:
60%
Profitability Index:
20%
APAC
25
High
Medium
Capacity Index
Low
~100-250 KT
~40-90 KT
~10-25 KT




26. 3
26

27. 2011
2012
Titanium Dioxide Price Trend USD/MT
2015
2013
2014
27
Future
?

28. Invest pragmatically to bridge your gap in estimated and actual cost savings
01
Acquire knowledge to gain UPPER hand during procurement negotiations
02
Utilize the CURRENT Market Scenario to your advantage
03
Leverage Costing-Profitability Knowledge NOW
28