NL Industries, Inc. (NL): PESTLE Analysis [Nov-2025 Updated]

You're analyzing NL Industries, Inc., and the core tension is clear: the near-term upside from Kronos Worldwide's cyclical TiO2 business versus the long-tail anchor of legacy lead paint litigation. While Kronos Worldwide is projected to bring in $1.8 billion in 2025 revenue, that growth is constantly challenged by the unpredictable, annual cash drain that could easily exceed $35 million, plus a $50 million environmental remediation reserve. You need to map the Political, Economic, and Legal forces that make this valuation so complex, so let's break down the PESTLE factors that define NL's risk-reward profile right now.

NL Industries, Inc. (NL) - PESTLE Analysis: Political factors

The political landscape for NL Industries, Inc. (NL) in 2025 is a classic study in trade-offs: government spending boosts demand for its core product, but regulatory and judicial scrutiny keeps the pressure high on its legacy liabilities. You need to look past the macro headlines and focus on the specific policy levers that affect the two main drivers of NL's value: the performance of its $\text{TiO}_2$ segment (via Kronos Worldwide, Inc.) and the management of its historic lead paint litigation risk.

US-China trade policy shifts affect global $\text{TiO}_2$ supply chain and pricing.

Geopolitical tensions continue to reshape the global Titanium Dioxide ($\text{TiO}_2$) market, which is a critical pigment for NL Industries, Inc.'s majority-owned subsidiary, Kronos Worldwide, Inc. The most immediate political action impacting the market in 2025 is coming from Europe, not just the US. The European Commission imposed definitive anti-dumping duties on $\text{TiO}_2$ imports from China, effective January 9, 2025. This is a significant move to protect the EU's domestic industry, with duties ranging from €0.25/kg to €0.74/kg, set to last for five years. This policy creates a trade barrier that could divert Chinese supply to other markets, potentially increasing price competition in non-EU regions, or conversely, firming up prices for Western producers like Kronos Worldwide, Inc. operating in the EU.

In the US, the political rhetoric around trade remains volatile. While $\text{TiO}_2$ and its raw materials were previously exempt from reciprocal tariffs, the Trump Administration announced a pause on broader reciprocal tariffs effective May 14, 2025, retaining a temporal 10% tariff for 90 days. This constant threat of new tariffs creates supply chain uncertainty for all chemical manufacturers. On a positive note for the commodity, China's $\text{TiO}_2$ price began a new round increase of \$70/ton in August 2025, which, alongside stable processing activity, has helped the global $\text{TiO}_2$ price outlook to remain balanced, following a late 2024 price point of \$2060/TON in December 2024.

Here's the quick math: if trade barriers reduce the flow of cheaper Chinese $\text{TiO}_2$ into high-value markets, Kronos Worldwide, Inc. has a better chance to maintain or raise its average selling price, which directly benefits NL Industries, Inc.'s equity value.

Government infrastructure spending boosts demand for paint and coatings.

The Bipartisan Infrastructure Law continues to be a major tailwind, directly translating political will into commercial demand for $\text{TiO}_2$-based products. The US Paints and Coatings Market, the largest end-user for $\text{TiO}_2$, is forecast to grow in 2025, driven heavily by public infrastructure spending. The total US paints and coatings market is projected to reach a value of \$35.7 billion in 2025, a 5.3% increase in value over 2024. The volume is expected to grow by 2.3% to 1.39 billion gallons.

The protective coatings segment, which is used for bridges, pipelines, and other heavy infrastructure, is seeing the most direct impact. This segment is forecast to grow 6.2% in value to approximately \$2.8 billion in 2025, with volume reaching 63.5 million gallons. The political commitment of \$40 billion in dedicated funding for bridges alone, part of the overall \$1 trillion infrastructure bill, ensures this demand remains robust for the near term. This is a clear, positive political factor for NL Industries, Inc. because it guarantees a strong, government-backed demand floor for a key raw material of its primary revenue stream.

Regulatory changes in lead abatement funding impact litigation settlement leverage.

The political and regulatory environment surrounding lead abatement remains a persistent, material risk for NL Industries, Inc. The core issue is the ongoing legal exposure from historic lead paint manufacturing, which is prosecuted under public nuisance laws. The political factor here is the sustained government and judicial commitment to remediation, which maintains the company's litigation settlement leverage.

NL Industries, Inc. was a party to the landmark California public nuisance settlement, which totaled \$305 million, with NL's share being \$101.6 million. The fact that government entities, like Santa Clara County, received and are actively using funds (e.g., \$133 million) to clean up lead paint hazards in pre-1978 homes means the political and social impetus for abatement is not waning. Furthermore, the legal environment remains active, as evidenced by the 2025 Tenth Circuit Court of Appeals case, Atlantic Richfield Co. v. NL Industries, which addressed contribution claims for environmental cleanup costs. The political decision to maintain and enforce these environmental and public health regulations is what keeps this legacy liability an active financial consideration.

Increased scrutiny on corporate governance for companies with large legacy liabilities.

Investors and regulators are increasingly focused on Environmental, Social, and Governance (ESG) factors, and for a company like NL Industries, Inc. with material legacy liabilities, governance oversight is under the microscope. The political climate favors transparency and robust risk management, especially when a company has recognized a material liability related to a legal settlement.

The general trend in 2025 corporate governance is for boards to optimize their oversight of risk management and business strategy. For NL Industries, Inc., its corporate governance structure is notable: the Board of Directors has chosen not to have a nominating committee, as permitted by NYSE listing standards. While legally compliant, this structure, combined with a large legacy liability, is a potential point of scrutiny for institutional investors and proxy advisory firms who prioritize independent oversight and robust committee structures to manage long-term, systemic risks like litigation exposure. The political and regulatory expectation is that the board's risk oversight function must be strong enough to manage the uncertainty surrounding its ongoing legal and environmental obligations.

NL Industries, Inc. (NL) - PESTLE Analysis: Economic factors

You're looking for a clear map of the economic landscape for NL Industries, Inc. (NL), whose core business is the titanium dioxide ($\text{TiO}_2$) production through its subsidiary, Kronos Worldwide. Here's the direct takeaway: The 2025 economic environment presents a mixed bag of moderate global growth and stubbornly high input costs, which will squeeze margins unless $\text{TiO}_2$ pricing holds firm. The cost of capital remains a significant hurdle for necessary capital expenditures (CapEx).

Global GDP growth forecasts for 2025 directly influence Kronos Worldwide's $\text{TiO}_2$ demand.

The demand for $\text{TiO}_2$, which is used in paints, coatings, and plastics, is highly cyclical and tied directly to global economic health. For 2025, the picture is one of continued, albeit slower, expansion. The International Monetary Fund (IMF) projects global growth to slow slightly to 3.2% in 2025, down from 3.3% in 2024. To be fair, other forecasts are more cautious; the World Bank, for instance, projects a lower global growth rate of 2.3% for 2025. This divergence suggests a fragile recovery, not a boom.

The key is that growth remains subdued in advanced economies, which are major buyers of high-value $\text{TiO}_2$ products. Advanced economies are projected to grow around 1.5% in 2025, while emerging markets are expected to grow just above 4%. This means Kronos Worldwide needs to focus its sales strategy on the stronger emerging markets to capture the higher growth.

Inflationary pressure on energy and shipping costs impacts margins; $\text{TiO}_2$ price increases must offset this.

The persistent inflation in key input costs is a major headwind for Kronos Worldwide. The chemical industry is energy-intensive, and energy costs, particularly in Europe where Kronos Worldwide has significant operations, are expected to remain structurally higher than pre-crisis levels. This is defintely a long-term competitive disadvantage for European production sites.

Global shipping costs are also volatile. While container freight rates saw a mid-year spike before plummeting, the underlying supply chain remains under pressure from geopolitical tensions and disruptions like the Panama Canal drought. US inflation is predicted to stay above target, even as global headline inflation is expected to fall to 4.4% in 2025. Kronos Worldwide must successfully implement $\text{TiO}_2$ price increases to offset these higher costs for natural gas, oil, and freight, or margins will compress.

• Energy costs in Europe remain structurally high.
• Shipping costs are volatile due to geopolitical and canal disruptions.
• US inflation is expected to remain above target in 2025.

Housing and automotive sector slowdowns decrease demand for high-value coatings.

The demand for $\text{TiO}_2$ is heavily reliant on the coatings market, which serves the housing and automotive sectors. The picture here is mixed, not a universal slowdown, but certainly uneven growth. In the US housing market, home prices are seeing their slowest annual growth since 2023, with an annual gain of only 1.6% in August 2025. However, sales activity is expected to pick up in some key regions due to lower mortgage rates. California, for example, is forecast to see a 10.5% increase in existing single-family home sales in 2025, reaching 304,400 units.

The US automotive sector is showing signs of recovery, with new light-vehicle sales forecast to reach between 16.2 million and 16.4 million units in 2025. This is the best year since 2019, but it's still below the pre-pandemic peak of 17 million units. The struggling German automotive industry, however, is acting as a drag on the European paints and varnishes subsector, which directly impacts $\text{TiO}_2$ demand in that region.

High interest rates increase the cost of capital for necessary CapEx at production facilities.

Despite a slight easing, the cost of capital for financing large-scale capital expenditures (CapEx) remains elevated. The US Federal Reserve's target rate was lowered to a range of 3.75%-4.0% in October 2025. Similarly, the European Central Bank (ECB) Deposit Facility Rate stands at 2.00% as of November 2025. These rates, while lower than recent peaks, are still high enough to make financing new production capacity or major plant upgrades more expensive for Kronos Worldwide.

Here's the quick math: A higher interest rate means a higher discount rate for future cash flows, which lowers the Net Present Value (NPV) of new projects. This high cost of capital is a factor in the global chemical industry's CapEx growth, which is expected to rise to 3.5% in 2025, but this is still a slow pace given the need for modernization and green transition investments.

• US Federal Reserve Target Rate (October 2025): 3.75%-4.0%.
• ECB Deposit Facility Rate (November 2025): 2.00%.
• Global Chemical Industry CapEx Growth (2025): Projected to rise to 3.5%.

NL Industries, Inc. (NL) - PESTLE Analysis: Social factors

Growing consumer demand for sustainable, low-VOC (volatile organic compound) paints

You are seeing a clear, accelerating shift in consumer behavior toward healthier, eco-conscious products, and this directly impacts the demand for Titanium Dioxide ($\text{TiO}_2$), the core product of NL Industries' subsidiary, Kronos Worldwide, Inc. The market for low-VOC (volatile organic compound) and zero-VOC paints is booming because people care more about indoor air quality and environmental impact. This isn't a niche trend anymore; it's a fundamental market re-rating.

Here's the quick math: The global low-VOC paints and coatings market is projected to be valued at approximately $28.3 billion in 2025. That market is expected to grow at a Compound Annual Growth Rate (CAGR) of 6.9% from 2025 to 2032. For Kronos, this is a massive opportunity, as $\text{TiO}_2$ is a critical component for opacity and brightness in water-based, low-VOC formulations. The US and North America are leading this charge, expected to hold 39.2% of the global low-VOC paints market share in 2025. You need to ensure Kronos's product mix is optimized for these waterborne systems, which now represent over 60% of architectural paint sales in developed markets.

• Global Low-VOC Market Value (2025): $28.3 billion
• Projected CAGR (2025-2032): 6.9%
• North America Market Share (2025): 39.2%

Increased public awareness of historical lead paint risks keeps legacy litigation in the media spotlight

The decades-old lead paint litigation remains a significant social and reputational risk, even as the legal battles wind down. Public awareness of lead's toxicity-especially for children-is high and constantly reinforced by media coverage of legacy cases. This awareness creates a permanent social headwind for any company with historical ties to lead pigments, regardless of their current business focus on $\text{TiO}_2$.

NL Industries, Inc. has been dealing with this for over two decades. The most significant financial impact came from the multi-defendant California public nuisance lawsuit, where NL Industries, Inc. reached a settlement of $60 million with ten California jurisdictions in 2018. This followed a prior court order that had set the abatement fund for pre-1951 homes at $409 million. Later, NL Industries' share of a separate 2019 settlement related to this litigation was nearly $102 million. While these settlements are in the past, the underlying public health issue is not, and the company must defintely manage the brand perception risk that comes from its former name, National Lead Co.

Emerging market infrastructure growth drives long-term demand for paint and coatings volume

The biggest long-term volume driver for $\text{TiO}_2$ is the sheer scale of urbanization and infrastructure development in emerging markets. This is a simple population and development story, and it's where the majority of new coating demand is coming from. $\text{TiO}_2$ is a 'quality-of-life' product; its demand generally tracks worldwide Gross Domestic Product (GDP) growth and rising standards of living, with consumption growing at a long-term CAGR of approximately 3% since 2000.

Asia-Pacific is the undisputed engine here. The region's paints and coatings market is estimated at $77.56 billion in 2025 and accounts for approximately 45% of global demand for construction paints and coatings. This growth is fueled by massive infrastructure projects and rapid urban development in countries like China and India. Kronos Worldwide, Inc. recognizes this, noting that markets for $\text{TiO}_2$ are generally increasing across the Asia Pacific region, South America, and Eastern Europe. This is where volume growth will be captured, even if margins are tighter than in mature Western markets.

Shift to digital media slightly reduces demand for $\text{TiO}_2$ in paper and print applications

The digital revolution has created a structural headwind for $\text{TiO}_2$ demand in its traditional paper application, but the impact is nuanced. As publishing and office printing decline, the need for the white, opaque pigment in standard paper stock decreases. However, a complete collapse hasn't happened; the demand has shifted.

The global digital printing market is still on a strong growth trajectory, expected to reach $87.21 billion by 2030, growing at an 11.9% CAGR. This is driven by packaging and specialty print, which still require high-quality pigments. The digital ink market itself is estimated at $6.8 billion in 2025 and is projected to grow at a 6.4% CAGR through 2033. The key takeaway is that while the volume for commodity paper is shrinking, the demand for high-performance $\text{TiO}_2$ grades in specialized digital coatings, packaging, and high-resolution print remains, forcing Kronos to focus on value-added pigment grades rather than just volume.

NL Industries, Inc. (NL) - PESTLE Analysis: Technological factors

Development of alternative white pigments poses a long-term threat to $\text{TiO}_2$ market share.

The core technology risk for NL Industries, Inc. stems from its subsidiary, Kronos Worldwide, Inc., whose business is dominated by Titanium Dioxide ($\text{TiO}_2$) pigment. While $\text{TiO}_2$ remains the gold standard-it has the highest opacity and UV resistance of all white pigments-the development of alternative white pigments and extenders is a long-term threat to market share.

The global $\text{TiO}_2$ market is projected to reach a size of approximately $22.4 billion in 2025, showing its continued dominance. However, the total White Inorganic Pigments market, which includes alternatives like zinc oxide and calcium carbonate, is expected to grow to $39.14 billion by 2032, indicating a persistent and growing competitive landscape. Kronos Worldwide is defintely focused on innovation to maintain its edge, developing new formulations like its $\text{TMP}$- and $\text{TME}$-free grades to address emerging product stewardship (ecolabel) requirements in Europe without sacrificing performance.

The market is not static; you need to track where the share is shifting.

New chloride-process $\text{TiO}_2$ plants require significant capital investment to maintain efficiency edge.

Maintaining a competitive advantage in $\text{TiO}_2$ production requires continuous, heavy capital investment, particularly in the more advanced chloride process. This process, preferred for the largest end-use markets like coatings and plastics, is less labor-intensive and has lower energy requirements than the older sulfate process.

Kronos Worldwide is committed to the chloride route. A clear example of this is the July 2024 acquisition of the remaining 50% interest in the Louisiana chloride-process joint venture (LPC) for $185 million. This move secures full control over a key modern asset. For the 2025 fiscal year, Kronos Worldwide has estimated capital expenditures that include approximately $24 million specifically for environmental compliance, protection, and improvement programs, which are primarily focused on increasing operating efficiency. This ongoing CapEx is essential to keep their facilities running at high utilization rates, which hit approximately 96% in 2024.

Investment in process automation at Kronos Worldwide's facilities aims to reduce labor costs and improve yield.

Process automation is a key lever for cost control and yield improvement, especially in a capital-intensive industry. The shift toward the chloride process is inherently a step toward automation, as it requires a higher-skilled but smaller labor force. The broader industry trend for 2025 emphasizes the adoption of AI and automation to increase efficiency.

Kronos Worldwide's strategy reflects this focus on process innovation to drive down costs and improve product consistency.

• $24 million: Estimated 2025 capital expenditure for efficiency programs.
• Less Labor-Intensive: Chloride process has lower labor requirements than the sulfate process.
• New Pigment Slurries: Development of new liquid pigment slurries simplifies the customer's paint production, offering a lean, simple, and cost-efficient manufacturing process for them, which in turn strengthens Kronos's value proposition.

Investing in process technology is the only way to stay ahead of the competition on cost.

Digital supply chain tools are being used to optimize logistics for raw materials like ilmenite.

Optimizing the supply chain for raw materials is critical, especially for ilmenite, a key feedstock for $\text{TiO}_2$ production, which Kronos Worldwide sources partly from its two ilmenite mines in Norway. To manage this complex global flow of materials and finished products, Kronos Worldwide has invested in a digital supply chain transformation.

They implemented SAP's ERP (Enterprise Resource Planning) system to centralize control and streamline operations across their global manufacturing locations. This foundational step was followed by the addition of a transportation management system and a push for digitization to improve electronic connectivity with warehousing and transport partners. This visibility is crucial, not just for cost reduction, but also for meeting customer demands for better service and shipment tracking. The goal is a more resilient and cost-effective system.

NL Industries, Inc. (NL) - PESTLE Analysis: Legal factors

Ongoing, costly public nuisance litigation related to historical lead paint sales remains the primary financial risk.

The most significant and long-tail legal exposure for NL Industries, Inc. continues to be the public nuisance litigation stemming from its historical manufacture and promotion of lead-based paint, particularly the Dutch Boy brand. This is a multi-decade risk that keeps generating material costs, so you should track it closely.

The landmark case involving ten California cities and counties, which asserted a representative public nuisance claim, resulted in a global settlement. NL Industries, Inc.'s share of that settlement was approximately $101.6 million. While this payment was made years ago (in 2019), the legal costs haven't stopped; the company is still engaged in litigation with its former insurers, like Lloyd's of London, to compel them to cover this massive abatement fund payment.

Also, new lead-related cases are still being filed. For example, the company is currently defending itself against a third-party complaint for contribution in a Wisconsin lead paint case. This shows the liability is not just a single, settled issue but an ongoing, defintely costly legal program.

Strict EPA regulations on chemical waste disposal at manufacturing sites require continuous compliance spending.

Compliance with U.S. Environmental Protection Agency (EPA) regulations, especially the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund), is a major, non-negotiable cost of doing business. You saw a huge, concrete example of this in the first quarter of 2025.

In Q1 2025, NL Industries, Inc. made a payment of $56.1 million, plus $0.5 million in interest, to resolve extensive environmental litigation related to the Raritan Bay Slag Superfund Site in New Jersey. This settlement, which was part of a larger $151.1 million collective payment with other private entities, addressed past and future response costs under CERCLA and the New Jersey Spill Compensation and Control Act (NJ Spill Act).

Separately, the company is involved in contribution lawsuits regarding other Superfund sites, such as the Atlantic Richfield Co. v. NL Industries case in the Tenth Circuit, which was active in early 2025. This means the company is constantly defending itself against claims for historical cleanup costs. The good news is that the subsidiary CompX International Inc. believes it is in substantial compliance with current laws, and so far, compliance costs have not significantly impacted its operating results.

International trade laws, such as the EU's REACH, affect global sales and product registration compliance.

NL Industries, Inc.'s global chemical operations, primarily through its subsidiary Kronos Worldwide, Inc. (a major titanium dioxide ($\text{TiO}_2$) producer with European facilities), are heavily influenced by the European Union's Registration, Evaluation, Authorisation, and Restriction of Chemicals (REACH) regulation. This is a moving target.

The regulatory environment in Europe has become stricter in 2025, demanding continuous updates to product formulations and supply chain communication.

• The updated Classification, Labelling, and Packaging (CLP) Regulation, which includes new hazard categories for Endocrine Disrupting Chemicals (EDCs), required compliance by May 1, 2025.
• New substances are constantly being added to the REACH Candidate List of Substances of Very High Concern (SVHCs), increasing the administrative and testing burden for Kronos Worldwide, Inc.
• In June 2025, the EU restricted two new chemicals, N,N-dimethylacetamide (DMAC) and 1-ethylpyroolidine-2one (NEP), under REACH Annex XVII, with prohibitions effective in late 2026.

This evolving framework requires significant investment in regulatory affairs to ensure that Kronos Worldwide, Inc.'s products, including its core $\text{TiO}_2$ pigments, can continue to be sold across the EU without disruption. One wrong step means a huge fine or a market ban.

NL Industries, Inc. has reserved an estimated $50 million for specific environmental remediation liabilities as of late 2025.

While the initial estimate may have been $50 million, the company's recent financial disclosures provide more precise figures for its environmental liabilities. The total accrued liability for environmental remediation and related matters as of December 31, 2024, was approximately $69 million, covering around 30 sites.

Following the significant Q1 2025 settlement payment of $56.1 million, the forward-looking risk profile has been refined. Here's the quick math on the remaining exposure: the upper end of the range of reasonably possible costs for remediation and related matters is now estimated to be approximately $38 million, which already includes the amounts currently accrued.

Finance: draft 13-week cash view by Friday, explicitly modeling the impact of the $38 million upper-end environmental liability against current liquidity.

NL Industries, Inc. (NL) - PESTLE Analysis: Environmental factors

Pressure to reduce the carbon footprint from the energy-intensive $\text{TiO}_2$ production process.

NL Industries' primary operational exposure to environmental risk comes through its majority-owned subsidiary, Kronos Worldwide, which is a major global producer of titanium dioxide ($\text{TiO}_2$) pigment. The company's production relies on the sulfate process, a method notoriously known for being energy-intensive and having a higher environmental impact compared to the chloride process. Industry trends in 2025 show a clear move toward sustainable production, which puts pressure on Kronos Worldwide's older facilities.

This is a capital problem, not just a green one. The industry is actively innovating to reduce its footprint, with new sulfate technologies emerging that promise minimal environmental impact, including a significant reduction in $\text{CO}_2$ emissions and zero liquid waste. Kronos Worldwide has four $\text{TiO}_2$ plants in Europe, a region with particularly stringent environmental standards like $\text{REACH}$. This means the cost of energy and carbon is a direct threat to margin.

• Sulfate process uses more energy than the chloride process.
• Global market trends favor cleaner production methods.
• New technologies target zero liquid waste and lower $\text{CO}_2$.

Managing and remediating historical environmental contamination sites is a major financial drain.

The most immediate and material environmental risk for NL Industries, Inc. is the financial drain from managing and remediating legacy contamination sites, a direct result of its historical operations. This is not a theoretical liability; it is a cash-flow reality. In the first half of 2025 (H1 2025), the company's operating cash flow swung to a net use of $\textbf{\$40.2 million}$, driven largely by environmental payments.

The single largest recent payment was approximately $\textbf{\$56.1 million}$ plus $\textbf{\$0.5 million}$ in interest paid toward the Raritan Bay Slag global settlement in H1 2025. This huge cash outflow, even with an offset of $\textbf{\$9.6 million}$ received from other parties, severely constrained liquidity. As of June 30, 2025, NL Industries, Inc. had environmental remediation accruals totaling $\textbf{\$13.3 million}$ for approximately $\textbf{29 sites}$ where remediation costs are estimable. The upper-end reasonably possible range for these costs is estimated at around $\textbf{\$38 million}$.

Here's the quick math: If Kronos Worldwide's 2025 revenue hits the projected $\textbf{\$1.8 billion}$, but the annual cash drain from legacy litigation and environmental reserves exceeds $\textbf{\$35 million}$, the net effect on NL Industries' consolidated cash flow is severely constrained. That's why the Legal and Environmental blocks are so critical.

The company also faces ongoing risks from historical lead paint litigation. NL Industries, Inc. was responsible for approximately $\textbf{\$101.6 million}$ of the $\textbf{\$305 million}$ settlement in the California lead paint case, and litigation with insurers over coverage for this liability continues.

Stricter global standards for effluent and waste from sulfate-process plants require costly upgrades.

The regulatory environment, particularly in Europe where Kronos Worldwide operates four $\text{TiO}_2$ plants, is tightening around waste and effluent from the sulfate process. This production method, which uses ilmenite ore and sulfuric acid, is known for generating large volumes of byproducts like ferrous sulfate (copperas) and acid waste. Stricter global standards force significant capital investment to manage these wastes.

Kronos Worldwide has explicitly budgeted for this. The company intends to spend approximately $\textbf{\$55 million}$ on capital expenditures during 2025. Of this total, an estimated $\textbf{\$24 million}$ is allocated to environmental compliance, protection, and improvement programs. This spending is necessary to maintain operating licenses and improve environmental protection, such as reducing emissions from its manufacturing plants. You can't defer these costs.

Focus on the circular economy could eventually reduce demand for virgin materials like titanium feedstock.

The long-term shift toward a circular economy presents both a risk and an opportunity. The risk is that a focus on recycling and resource efficiency could, over time, reduce the demand for virgin titanium feedstock, which Kronos Worldwide is vertically integrated to supply from its owned ilmenite mines. The opportunity lies in finding value-added uses for the large waste streams produced by the sulfate process.

Some competitors are already converting $\text{TiO}_2$ process byproducts into materials for other high-growth sectors, like lithium-ion batteries. This is the future of sustainable production. Kronos Worldwide's ability to convert its own waste streams from a costly liability into a saleable asset-a true circular model-will be a key determinant of its long-term cost position against more environmentally-friendly chloride-process competitors.

Your next step: Model a 13-week cash flow view for NL Industries, Inc. that explicitly includes a quarterly stress test for a sudden, adverse lead paint litigation ruling.