Point well taken @Rajesh1975
You mean to say, survivors of a disruption take full advantage of the sudden cash flow and starts building capacity… And hence all similar attitude starts resonating, the supply increases thus blunting the demand supply gap…
But i dont understand how supply crunch in whole of china which used to be the dominant player is going to be replenished by capex by other secondary players so soon given the fact that capex dose take time to come online…
But why will any company risk its financial health to mount capacity if the cycle has topped …
Specifically for aksharchem, its capacity utiliation has remained the same since last 3 years, so it can be concluded the production volumes didnt increase plus the inventory levels remains the same , rather has increased a bit …
The last time they did capex was in 2015 when they were maxing out on capacity, that makes sense…
So this time if capex is done at submaximal capacity utilization will it not indicate this is the infliction point…
On a side note half of the capex is being done in precipitated silica which is not a part of chinese disruption…
Plus venyl sulphone margins are taking a hit due to a major raw aniline whose prices have surged due to similar chinese disruption theme and prices have become highest ever…
So if aniline is also at the top of a cycle with impending oversupply, its crash shall bring up or balance the price decreased of venyl suphone in case of laters price crash…
So the worse case can be of neutral effect…
According to peter lynch, capex is a red flag only when the company has maxed out on its full capacity
Please share your views on this confusion…