Document dYMJZGObXb4Y860a1gb47YnK5
CH-2 REV. 7*80
l5TA*U$KIOtW2 E. I. d u Po n t d e Ne mo u r s <5 Co mp a n y
INCORPORATED
Wil min g t o n , De l a w a r e 19898
CHEMICALS AND PIGMENTS DEPARTMENT
cc: L. H. Papineau
L. D, Greenberg J. E. Kramer
T. R. Wallingford S. F. West
R. N. Selby R. F. Hedgepath, Legal
E. w. Stewart, Chestnut Run
R. J, Buch J, T. Bilek White Pigments and Mineral Products
Group
File: Price Increase
July 10, 1981
"FOR DU PONT USE ONLY"
DISTRICT MANAGERS ASSISTANT DISTRICT MANAGERS COMMERCIAL ASSISTANTS ACCOUNT EXECUTIVES AND MANAGERS SALES REPRESENTATIVES
TI-PURE TITANIUM DIOXIDE PRICE INCREASE
SUPPORT INFORMATION
Support information for our August 1, 1981 price increase is included in the following attachments:
(I) Price Increase Announcement Teletype to District Management
(II)
Customer Letter (Price Schedule #2282 attached) to be mailed July 10, 1981.
(III) Distributor Letter (Price Schedule #2282 attached) to be mailed July 10, 1981.
(IV) (V)
Notes to the new Price Schedule #2282 for internal use only.
TiOj Background and Price Support Information.
(VI) Controlled Distribution Plan.
This information package is not to be handed out or shown to customers.
TAB/dmi Attachment
T. A. BARTOLEC
N42267
Tl-PURE PRICE INCREASE AUGUST 1, 1981 *
SUPPORT INFORMATION
"FOR DU PONT USE ONLY"
ATTACHMENT I
PRICE INCREASE ANNOUNCEMENT TELETYPE TO PISTRICTS
L. H. Papineau
L* D. Greenberg j. E, Kramer T. R, Wallingford S. F. West
R. N. Selby R. F, Hedgepath, Legal
E. W* Stewart, Chestnut Run R. J. Buch J. T. Bilek White Pigment and Mineral
Products Group
July 7, 1981
TO: FROM:
DISTRICT MANAGERS, C&P DEPT. ASSISTANT DISTRICT MANAGERS, C&P DEPT.
T. A. BARTOLEC, C&P, DEPT. B-17276
TI-PURE TITANIUM DIOXIDE PRICE INCREASE
Effective August 1, 1981, we are increasing the base price of Ti-Pure grades 6C/lb. In addition, the following changes in grade and LTL pricing and policies are being made:
(1) A 2C/lb. differential above the base price is established for all finished rutile slurry grades, resulting in a total increase of 8C/lb.
Please note: The 2C/lb. differential does not apply to anatase slurry (LWS) or Rutile Paper Slurry (RPS).
(2) The R-994 differential above the base price is increased from 2C/lb, to 4C/lb., resulting in an 8C/lb. increase.
DUP050071519
N42267.01
2
(3) The LTL upcharge over base prices is increased from 4.5/lb. to S.0<=/lb* for shipments of 5 tons minimum, but less than 20 tons,
(4) The FOB designation on shipments of less than 5 tons is changed from "ship point" to "producing plant", freight collect. The upcharge over base prices will remain 4.5C/lb.
(5) A 3% distributor discount is established for approved third party sales through authorized distributors.
(6) A 2C/lb. upcharge is established for R-100 and R-101 supplied in plastic bags.
(7) Deletion of warehouses that have closed or are in an advanced stage of closing.
(8) A requirement is established that the quantity o each grade purchased as part of a mixed carload/truckload must be in standard pallet increments.
The price increase is needed to recover those costs not recovered in our January, 1981 increase plus further escalations since then in raw materials, labor, energy, waste disposal, freight and other distribution expenses. Please keep in mind that current profitability is unacceptable, and future increases will have to provide for improvement.
Items 1-3 and 6 are fully cost justified. Items 4 and 7 reflect the reduction in the number of field warehouses that have occurred and their total elimination by year end. item 5 establishes the third party distributor discount as standard policy. Item 8 eliminates the costly practice of breaking down unit palletloads.
The price increase will be effective September 1, 1981 to authorized distributors, contract and blanket order customers, or as otherwise specified by existing Agreements,
RPA's will terminate in accordance with SP-4023.
To provide good customer service, we plan to control all purchases in July, plus contract and blanket order customers in August, at 120% of monthly average purchases during the twelve month period ending May or contract/blanket order maximum quantities, whichever is greater. Hardship situations, however, should be brought to our attention.
You are free to discuss this information with customers immediately. You will receive back-up material to support the increase promptly. Separate customer letters for consumers and distributors will be mailed from Wilmington July 10, 1981.
DUP050071520
-3You will prepare your own letters for contract customers as required. Headquarter's district is responsible for coordinating communications to branches of national accounts.
Please keep us abreast of reaction in the marketplace and competitive activity.
Good luck. If we can assist your selling effort in any way, please call. TAB/dmi
DUP050071521
TI-PURE PRICE INCREASE AUGUST 1, 1081
SUPPORT INFORMATION
"FOR DU PONT USE ONLY"
ATTACHMENT II CUSTOMER NOTIFICATION LETTER
July 10, 1981
Dear Customer;
Effective August 1, 1981, or as permitted by contract, we are increasing Ti-Pure titanium dioxide prices to those shown on the attached Schedule (#2282). Please note the following specific changes;
(1) Prices are increased 6 e/lb. for dry rutile grades# anatase grades, and Rutile Paper Slurry (RPS).
(2) Prices are increased 8 d/lb. for rutile slurry grades and R-994.
(3) The LTL differential above truckload/carload prices for Shipments of 5 tons minimum, but less than 20 tons, is increased from 4.SC to 5.0C/lb.
(4) The FOB designation on LTL shipments of less than 5 tons is changed from "ship point" to "producing plant" basis. Freight will continue to be collect. There is no change in the current 4.5C/lb. differential above truckload/ca rload prices,
(5) A 2C/lb. upcharge is established for R-100 and R-101 grades supplied in plastic bags. Supply is limited and availability should be reviewed with your sales representative prior to ordering.
This price increase is needed to recover those costs not recovered in our January, 1981 increase plus further escalations since then in raw materials, labor, energy, waste disposal, freight and other distribution expenses.
To assure all customers' product needs are met on an equitable basis, July and August orders will be limited to 120% of monthly average purchases during the twelve-month period ending May or contract/blanket order maximum; whichever is greater.
We very much appreciate your continued titanium dioxide purchases from Du Pont and are committed to providing you good service.
Very truly yours.
District Manager Attachment; Price Schedule #2282
DUP050071522
N42267.02
N42267.03
TI-PURE PRICE INCREASE
AUGUST 1, 1981 SUPPORT INFORMATION
"FOR DU PONT USE ONLY"
ATTACHMENT III
DISTRIBUTOR NOTIFICATION BETTER
July 10, 1981
Dear Distributor:
Effective August 1, 1981, we are increasing Ti-Pure titanium dioxide prices to those shown on the attached Schedules (#2282). As an authorized Du Pont distributor, these prices will be effective to you September 1, 1981.
Please note the following specific changes:
(1) Prices are increased 6/lb. for dry rutile grades, anatase grades, and Rutile Paper Slurry (RPS).
(2) Prices are increased 8$/lb. for rutile slurry grades and R-994.
(3) The LTL differential above truckload/carload prices for shipments of 5 tons minimum, but less than 20 tons is increased from 4.5$ to 5.0$/lb.
(4) The FOB designation on LTL shipments of less than 5 tons is changed from "ship point" to "producing plant" basis. Freight will continue to be collect. There is no change in the current 4.5<:/lb. differential above truckload/carload prices.
(5) A 2<?/lb. upcharge is established for R-100 and R-'lOl grades supplied in plastic bags. Supply is limited and availability should be reviewed with your sales representative prior to ordering.
(6) Establishment of a 3% distributor discount on approved third party sales through authorized distributors.
This price increase is needed to recover those costs not recovered in our January, 1981 increase plus further escalations since then in raw materials, labor, energy, waste disposal, freight and other distribution expenses *
To assure all customers' product needs are met on an equitable basis, July and August orders will be limited to 120% of monthly average purchases during the twelve-month period ending May or contract/blanket order maximum; whichever is greater.
DUP050071524
N42267.04
2- *
We very much appreciate your continued titanium dioxide purchases from Du Pont. We are committed to providing you good service and look forward to working with you to increase Ti-Pure titanium dioxide sales.
Very truly yours,
Attachments;
District Manager Price Schedules (#2282),
DUP050071525
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DUP050071529
N42267.07
TI-PURE PRICE INCREASE AUGUST 1, 1?81 *
SUPPORT INFORMATION
"FOR DU PONT USE ONLY"
ATTACHMENT V
TjO? BACKGROUND AND PRICE SUPPORT INFORMATION
The following is intended to aid your discussion of the current price increase with customers. It also provides a platform for ongoing discussions since future increases will be necessary to recover escalations in costs and to achieve an acceptable level of profitability. Both objectives must be met to insure continuing dependable supply and service to our customers.
This information is not for handout to the customer.
BACKGROUND
Titanium Dioxide is made by Du Pont using the chloride process we pioneered and have continued to develop since the 1950Vs.
A simplified process diagram is shown below:
Slurry Product 4--------------------------Bulk Product---- ------------------- Bagged Product
Titanium Dioxide is produced by first chlorinating ilmenite ore (ilmenite is a titanium-bearing mineral containing iron and other trace metals) in the presence of carbon (coke). Iron chloride is separated and the intermediate titanium tetrachloride is purified. The pure tetrachloride is then oxidized to form pigmentary titanium dioxide and chlorine. The chlorine is recycled to chlorination where additional fresh chlorine is added to replace that lost as iron chloride.
DUP050071530
N42267.08
2
The raw pigmentary Ti02 is finished with a variety of oxide coatings which provide the properties necessary for paint, plastics, ink and certain paper applications.
Our technology allows us to manufacture two crystal forms of Ti02, rutile and anatase, using the same process. Among chloride producers, we are unique in this respect.
Rutile is preferred in paint and plastics applications because it provides better hiding power (opacity). Anatase grades have traditionally been used in paper because they were sold at a lower price than rutile grades prior to the introduction of Rutile Paper Slurry (RPS). RPS continues to make substantial inroads in the paper industry, at the expense of anatase, because of superior optical properties.
Our Antioch, California; New Johnsonville, Tennessee; and De Lisle, Mississippi Plants produce rutile pigments principally for coatings but also for plastics applications. Our Edge Moor, Delaware unit manufactures both rutile, including RPS, and anatase primarily for the plastics and paper industries. Rutile slurry facilities exist at New Johnsonville, Antioch and Edge Moor.
New Johnsonville is the world's largest plant and De Lisle is second, but with the largest single line operation. Antioch was sized for the West Coast market and is significantly smaller (the size of most competitive chloride plants).
Our proprietary chloride process technology allows cost effective use of less expensive, lower grade ores versus competi tion, Our plants are two to four times larger than competition, providing economies of scale during periods of high demand.
We have enjoyed excellent labor relations on all sites and have never suffered a work stoppage. Multiple operating lines provide insurance against catastrophic events. We have assured ore supplies from multiple sources. Flexibility in fuel utiliza tion capability between oil and gas permits sustained operation in all but the most extreme circumstances of energy curtailment.
Operating performance of all our plants has been excellent the past few months, and inventories are at levels needed to provide good customer service.
CUSTOMER SERVICE
Du Pont markets the broadest product line and has been the leader in developing pigments which benefit customers either by their performance advantages or by reducing manufacturing costs (i.e, slurry grades). We are also recognized as the leader in providing valuable technical service.
DUP050071531
-3-
Du Pont is a recognized reliable source of supply. The building of De lisle was our most recent commitment to supply the growing needs of the marketplace.
Du Pont delivery service is highly reliable. Performance during the current high demand period is excellent with no significant delivery problems. Our tank car fleet, the industry's largest, is adequate to deliver customers' needs for slurry grades through 1982 and will be enlarged to meet future demand growth,
SUPPLY/DBMAND
The worldwide business recession has temporarily resulted in Ti02 oversupply. However, major consuming markets continue to recover from last year's low points.
The recession experience tends to obscure a more balanced supply/demand situation expected next year (see the "World of Ti-Pure" for additional details). There is a potential for worldwide shortage in 1983.
Du Pont is the world's largest producer (17% of total capacity) and has 52% of domestic capacity. As operating rates are increased, De Lisle will supply the growing needs both in the U.S. and export markets.
Imports (97M tons) maintained a 13% share of the U.S. market in 1980. Through April, they have risen 18% above the level during the same period in 1980, To date, the increase has not had a serious negative impact on domestic pricing, and there is some evidence that the increase is due to lower operating rates at NL's Sayreville, Hew Jersey facility.
Reportedly, American Cyanamid, Kerr-McGee, and SCM are currently operating at or near capacity.
PRICE INCREASE RATIONALE
This price increase is needed to recover those costs not recovered in our January, 1981 increase plus further escalations since then in raw materials, labor, energy, waste disposal, freight and other distribution expenses.
The increase maintains our current level of profitability. Customers should be aware that this level is unacceptable.
TiOz production is capital intensive, not only in terms of the huge investments necessary for new capacity, but just to maintain existing facilities. Future price increases will have to provide for margin improvement, as well as recover increased costs, to support these required capital expenditures. These facts should be an ongoing topic of discussion with customers.
DUP050071532
*4-
COST BACKGROUND
Major variable cost areas for the chloride process include ingredients (primarily chlorine, coke, and ore) energy, waste disposal, and finished product distribution expense.
The, 1/2/81 price increase only partially recovered cost
increases from 3/1/80 (the effective date of the preceding price increase) to the end of 1980. Despite temporary decreases in
some ingredient costs, costs overall have risen since then. Upward costs pressure will continue despite our substantial R&D
commitment and successes in the cost containment area. By mid-year 1982, costs are expected to be more than 15% higher than year-end 1980 costs. Specific examples are:
Chlorine Ore Natural Gas
Electricity FPDE Wages & Salaries
*10% >10% >60% >20% >15%
>15%
The Superfund Tax and early decontrol of domestic crude will increase 1981 costs by $3MM.
COMMENTS ON MAJOR PRICE SCHEDULE CHARGES
Rutile Slurry Price Differential
A 2C/lb. price premium for rutile slurry products versus dry counterparts is established with this increase.
Thorough analysis shows the actual full cost penalty (slurry versus dry) is 2.4C/lb.; due primarily to the additional investment in slurry make-up and storage facilities and tank cars; and the extra cost of slurry processing chemicals. Manufacturing cost
reduction programs and marketing's efforts in improving tank car utilization and obtaining longer order lead time have contributed significantly in keeping the cost penalty at the current level. Further success is anticipated in these areas, as well as through the grade consolidation program, to bring the cost penalty in line with the price differential and keep it from rising further.
Estimates of slurry's value to customers range from 3-6C/lb. Customers' perceptions will, of course, vary and will depend to a
great degree on how well costs are identified and quantified throughout the manufacturing operation. Nonetheless, slurry clearly provides customers real and significant cost savings opportunities as highlighted below:
Reduced Labor Costs - eliminates handling to unload, warehouse, deliverto and charge the process, and to remove and dispose of bags and pallets.
DUP050071533
5
Reduced Energy and Materials Costs - slurry make-up is eliminated, Ti02 losses (spillage, bag breakage, residual material le.ft in the bag) are minimized, and surfactant and preservative chemicals are already incorporated*
Better Throughput and Quality Control - faster charge time, superior dispersion, and minimization of makeup errors.
A second broad area of advantage involves environmental, employee relations, and safety and housekeeping considerations. Reduced dusting and less lost-time injuries because of reduced handling,, for example, can have a positive impact in this area; although this is not readily quantifiable and is even more a matter of individual perception.
Please note that the 2<f/lb, differential does not apply to RPS and LWS grades. Proprietary process advantages result in a different cost picture for RPS compared with finished rutile slurries, and a price premium is not required.
Because of the success of the RPS program, our role as an anatase slurry supplier has lessened. Cost aside, it is, therefore, inappropriate for us to initiate new policy on anatase pricing, and it is highly unlikely that competitors would support an anatase slurry differential since it would effectively aid our RPS market development program.
Increase in R-994 Differential
R-994 production is more costly than other grades because energy and other finishing costs are higher. Despite superior lightfastness properties - a critical requirement in paper laminates - versus domestic counterparts, the product is nonprofitable. Even with an active and ambitious manufacturing costreduction program, and assuming this is fully successful, the product will not attain an acceptable profit level long-tern without increasing its price differential versus other rutile grades. Therefore, the current increase is a necessary first step in determining the product's long-term viability.
We are seeking lower-cost alternatives to produce R-994, but success cannot be counted on.
Plastic Bag Ppcharge
Field intelligence and our market research program confirm that several competitors are actively promoting polyethylene bag packaging to resin-Ti02 concentrate producers. This container, which is charged along with the Ti02, reduces handling costs, Ti02 losses, and increases processing rates. One large concentrate producer estimates that throughput is increased by more than 10%.
DUP050071534
6
Currently, we are only facilitated at Edge Moor (CFKD process) to package in plastic bags. Therefore, supply is limited. An SCS and product group approval is required before making commitments to customers.
The 2$/lb. upcharge provides the basis for recovering our additional costs and will test the value to customers. It is our intent to realize this price premium versus paper bags as part of
the.justification for the Capital expenditures that will be necessary to facilitate our second manufacturing process at Edge Moor, as well as New Johnsonville and De Lisle, to provide this package. .
Distributor Discount on Third Party Sales
This price schedule establishes as standard policy a 3% discount to authorized distributors on approved third party sales.
while many factors may enter into the decision to approve a third party sales arrangement, the key determinant is that these sales cannot be obtained on a direct basis,
LTL Price Schedules
In accordance with our commitment to supply all LTL business through distributors and eliminate all field warehoues by year
end, this will be the last time LTL prices will be a part of the price schedule. Plans are to delete these from the schedule at year end.
PRICE HISTORY
This increase comes seven months following the last announced increase (1/2/81). A history of rutile base prices is shown below:
1972 1973 1974 1975 1976 1977 1978 1979 1979
1980 1981 1981
26,0$ 27.5* 40.0$ (3 increases as price controls were removed) 43.5$ 46.5$ 48.5$ (effective price rescinded to 46.5$ in January 1978) 46.5$ before June increase, 51$ thereafter 54,5$ in April (initiated by Du Pont) 59,0$ in September (initiated by NL)
63,0$ in March (initiated by SCM) 69.0$ in January (initiated by SCM) 75,0$ following this increase (initiated by Du Pont)
SUMMARY
Since 1970, total Ti02 costs have risen 240% while prices have increased only 130%, resulting in a precipitous decline in profit margin and return on investment.
DUP050071535
7 This situation must be turned around to justify the continued capital expenditures necessary just to maintain operations* much less expand capacity to meet the growing Ti02 needs of the world wide market. This issue, above all others, is what our customers must grasp and accept. This will present an ongoing challenge.
DUP050071536
TI-PURE PRICE INCREASE AUGUST 1, -19 81"
SUPPORT INFORMATION
"FOR DU PONT USE ONLY"
ATTACHMENT VI
CONTROLLED DISTRIBUTION PROGRAM NOTIFICATION TO DISTRICTS AND SALES ORDER CENTER
CC:
L. H. Papineau L. D. Greenberg J. E. Kramer T. R. Wallingford S. F. West R, N. Selby
R. F. Hedgepath, Legal E. W, Stewart, Chestnut Run R, J, Buch J, T. Bilek White Pigment and Mineral Products
Group
July 10, 1981
"FOR DU PONT USE ONLY"
DISTRICT MANAGERS ASSISTANT DISTRICT MANAGERS COMMERCIAL ASSISTANTS ACCOUNT EXECUTIVES AND MANAGERS SALES PRESENTATIVES
TI-PURE TITANIUM DIOXIDE CONTROLLED DISTRIBUTION PROGRAM
In order to preserve inventory at a level adequate to provide good service to all customers: Beginning July, purchases will be limited to 120% of monthly average purchases during the twelve-month period ending May or contract/blanker order maximum; whichever is greater. Controlled Distribution will terminate for open-market customers on August 1, and for standard contract/ blanket order customers and distributors on September 1. Customers whose price protection extends beyond September 1 will continue on controlled distribution for the duration of their price protection period.
The 120% basis selected should assure that the great majority of customers' needs are satisfied. If, -however, hardship situations arise, please bring these to our attention. One area where this is likely is with distributors, some of whom have been authorized recently, so that their purchase history may not reflect actual needs.
DUP050071537
N42267.09
2
The Sales Order Center will not accept orders above a customer's limit without specific authorization according to the procedures outlined in the attached "Guidelines for the SOC and District Offices."
This program should assure that customers' needs are satisfied through the price increase period. However, stocks are not adequate to sustain an uncontrolled surge of "price buying" without seriously jeopardizing customer service overall.
Thank you for your cooperation.
TAB/dmi Attachment
T. A. BARTOLEC
DUP050071538
GUIDELINES FOE SALES ORDER CENTER AND DISTRICT OFFICES
TiO2 CONTROLLED DISTRIBUTION
JULY
District Customer Lists will be provided showing July purchase limits for each customer location or national account headquartered within the district. Limits are provided for: anatase, rutile paper slurry, rutile dry bag, and rutile slurry. Although limits have not been provided by individual grade, the SOC will not accept orders for individual grades known to be out of line with a customer's normal purchase mix,
The limits were set based on 120% of 1/12 of the customer's last 12 months1 purchases, through May. These limits are liberal and should require adjustment in only a minority of cases. They may be rounded to accommodate a customer's normal order size.
Adjustment Procedure - A customer's purchase limit may be raised if these three conditions are satisfied:
a) Other customers are identified whose actual needs for the same product group are lower than the historical sales based limits and can be cut by an equal or greater amount,
b) a member of district management specifies the changes by teletype to the SOC (with a copy to T. J. Ertter), and
c) the SOC verifies that no customer has already ordered more than his reduced quantity. The SOC will notify the district if a discrepancy is found.
Hardship situations not satisfied by this procedure should be brought to the attention of the appropriate Product Manager.
National Accounts - National accounts may distribute their purchase limit as they see fit. It is the responsibility of the headquarters district to ascertain what shifts, if any, are desired, and teletype revisions to the SOC with a copy to T. J. Ertter, The SOC will implement the changes so long as no location has already placed orders in excess of its new quantity. The SOC will limit individual location purchase to the original limit until superseded by a headquarters district teletype.
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Contract Customers - contract customer limits have been set at the greater of 120% of 1/12 of the last twelve months' purchases or .contract/blanket order maximum, whichever is greater. Limit increases for contract customers may be made by using the adjustment procedure described above.
Receipt of Orders - Before July 13, the SOC will log orders for July shipment without comment and promptly notify districts of excesses. Beginning July 13, the SOC will inform customers who attempt to exceed their purchase limits that "we're experiencing a surge in demand; in the interest of preserving Our stocks and maintaining overall customer service, we are limiting individual customer orders for July shipment to normal needs as represented by historical purchases or contract maximums, whichever is greater." The CR will then place orders up to the customer's limit. If the customer indicates that this limitation will provide him with less than his needs, the CR will offer to have the district office contacted for further assistance.
The SOC will be provided with total order limits for certain low stock grades based on individual stock positions as of the end of June. Orders for July delivery will be taken for a particular grade up to this limit. Once the limit is reached, the SOC will offer customers "First In Line Positions" for production after August 1. If a customer objects, the district would be informed.
AUGUST Open Market Customers ~ Will be permitted to place orders at new prices without limitation. Contract/Blanket Order Customers and Distributors* - Same as
SEPTEMBER Controlled Distribution remains in effect to all customers with price protection beyond 8/31/81,*
* Including RPA customers with price protection.
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