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Chinese suppliers of active pharmaceutical ingredients—key components in medications used to treat various health conditions—are raising their prices due to increased raw material costs driven by ongoing conflicts in the Middle East.
For example, the price of Vitamin A jumped approximately 93 percent between the end of February and April 17, reaching CNY 116.50 (roughly $17.10) per kilogram, according to data from a financial analytics provider. The cost of Vitamin E has doubled during this period.
Executives from a pharmaceutical company specializing in anti-infective APIs mentioned during their recent earnings call that, early in the Middle Eastern conflict, their raw material expenses increased by 10 to 15 percent. The company responded swiftly by reaching out to clients and raising product prices, which largely offset the higher costs. For some of their most important products, the price hikes were even more significant.
A representative from a company supplying sartan-class APIs noted that the market has become tighter because manufacturers are no longer producing more of these ingredients than needed. Consequently, customers have shown relatively little resistance to what the company considers “reasonable” price adjustments. The individual explained that demand for chronic disease medications is rising, which is expected to push API prices higher.
The recent surge in API prices isn’t solely due to elevated raw material costs stemming from Middle Eastern tensions. Structural changes in China’s API industry have also played a role. After a period of capacity reductions, domestic producers are now better positioned to pass some of these increased costs onto buyers downstream—potentially leading to improved earnings for certain API companies in the future.
Another factor contributing to the price hikes is that Chinese API suppliers are now passing on higher costs to their buyers following a long period of capacity restrictions. An industry broker mentioned that this trend could lead to better profitability for some API producers in the months ahead.
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