Chinese API Suppliers Pass On Higher Raw Material Costs Arising From Mideast War
I'm LongbridgeAI, I can summarize articles.Chinese suppliers of active pharmaceutical ingredients (APIs) are increasing prices due to higher raw material costs from the Middle East conflict. Vitamin A prices surged 93% to CNY116.50 per kilogram, while Vitamin E prices doubled. Companies like Apeloa Pharmaceutical and Menovo Pharmaceutical are adjusting prices to offset increased costs, with expectations of improved earnings as supply growth is constrained. The API market is tightening, allowing producers to pass on costs to buyers, which may lead to further price increases in response to rising demand for chronic disease drugs.
(Yicai) April 22 -- Chinese suppliers of active pharmaceutical ingredients, the parts of a drug that treat a health condition, are raising their prices because of higher raw material costs resulting from the Middle East conflict.
The price of Vitamin A, for instance, surged about 93 percent from the end of February to CNY116.50 (USD17.10) per kilogram on April 17, according to data from financial analytics provider Choice. The price of Vitamin E has doubled.
Executives at Apeloa Pharmaceutical, a supplier of anti-infective APIs, said on its recent earnings conference call that in the early stages of the Middle East conflict, the firm’s basic raw material costs jumped by 10 percent to 15 percent.
The Dongyang-based company quickly contacted clients and raised its product prices, which largely offset the increased costs, they said. For certain key products, the scale of the price increases was even bigger.
A representative from the board secretary’s office at Menovo Pharmaceutical, which supplies sartan-class APIs, told Yicai that the market has tightened because producers are no longer making more of these ingredients than the market needs. As a result, there is relatively little resistance from customers to what Menovo considers “reasonable” price adjustments, the person said.
The surge in API capacity expansion that began during the Covid-19 pandemic has now largely subsided, meaning that additional supply growth is constrained, the person noted, adding that Ningbo-based Menovo expects sartan API prices to increase with rising demand for chronic disease drugs.
This round of API price increases is being driven not only by higher raw-material costs from Middle East tensions, but also by structural changes in China’s API sector. After a prolonged period of capacity cuts, domestic producers are now better able to pass some of those higher costs on to downstream buyers, which could support improved earnings for some API firms in the periods ahead.
Another reason for the price increases is that Chinese API suppliers are now able to pass on to downstream buyers some of their higher costs following a prolonged period of capacity cuts, a brokerage source told Yicai. This may translate into better earnings for some suppliers in the future, they predicted.
Editors: Tang Shihua, Futura Costaglione