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Lucky Marshmallow's avatar

Haha. Thanks for your comment Madhav.

Your observations are relevant. Structurally, it does look like steel making and refining capacity is growing in Asia and not so much in the West. This is the major source of RM for Rain.

On your point on energy prices and others - it depends on if the problem is structural or cyclical. I am not sure if one can assume the European energy problem to be a structural one.

Also, on CPC, let us see how it plays out in the full cycle. Their plants in the US have the advantage in transportation costs as far as the Western markets are concerned.

But overall, you are right. Over the really long-term, businesses like these should shift to Asia. Given increasing production capacities coming up, and the fact that the West does not want to encourage such facilities - due to NIMBY effect.

But then the question arises - strategically, is that a good thing for them? Post Covid, would they want to lose strategic raw materials like Aluminium to Asia?

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Madhav's avatar

Hi Rohith, Great write-up it provides a good long term bird's eye view on Rain Industries. I have a few questions for the business. My basic question is with the overestimation of the strength of the CPC and CTP Business even though both are mission-critical for aluminum production but recently with high energy prices demand destruction took place in Europe (which is the region where CTP caters) and CTP margins went down and they closed the plant for some time period. Also with the CPC business which is their cash cow as of now suffers from a similar problem where lack of good quality RM supply along with a shifting of growth to Asia and Middle East which are dumping grounds for Chinese Companies which doesn't suffer same problems as they have a large steel and oil refining industry along with the largest coal base.

This seems more like a reverse of Pharma industry where the market is shifting from Regulated to Un-regulated markets.

Thanks again and sorry for long writeup. (Seems like your 2019 style of writing is rubbing off on me xD)

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