China's Chemical Pharmaceutical Industry Rebounding   

After reorganization in 2006, China's chemical pharmaceutical industry began to pick up in 2007. According to the China Pharmaceutical Industry Association, China's chemical pharmaceutical industry achieved sales revenues of RMB202.5 billion in the first eight months this year, a growth of 24.6% - 5.6 percentage points faster than January to May this year. The net profit was RMB17.4 billion, an increase of 50.8% over the same period of 2006.

Export compensates for unfavorable factors

Shen Xianji, deputy director of China Pharmaceutical Industry Association expressed that the economy of pharmaceutical industry this year began to get better, mainly attributable to the following: the Chinese government strictly managed the sales and marketing of pharmaceuticals in 2006, manufacturers are continuously improving operational conditions, as well government announced many supporting policies, such as enlarging input to medical insurance, extending the coverage of medical insurance, increasing the market volume of common pharmaceuticals, etc.
   Chemical active pharmaceutical ingredients are faced by some unfavorable factors like the increased cost of environmental protection, lower export rebate rates, new administrative regulations put into force by the EU in June 2007, as well as the growing cost for exports and the like, most domestic pharmaceutical producers set their eyes on overseas markets. From January to August China's exports of chemical medicines grew by 46%, compared with 27.6% in the first five months.

Prices of API tend to be rational     

The slackness of 2006 market for traditional mainstream active pharmaceutical ingredients has passed, and prices, production and marketing and exports have been on the upswing in 2007. Of course, prices of some products even reached an unreasonable high, attracting more new competitors to add new capacity and helping existing producers who had discontinued production to restart, but those prices quickly declined to an equilibrium. The output of some active ingredients like penicillin, water soluble vitamins, thiocyanic erythromycin and tylosin increased, and their prices went up speedily. For example, the maximum price growth of vitamin B2 feed additives hit 189.35% and that of calcium pantlothenate was 113%. The maximum price growth of penicillin industrial salts, which are also largely exported by China, reached 112.86% but dropped rapidly back.
   Judging by the activity at the 59th API China Fair in Shenzhen November 13th-15th, domestic producers are presently offering US$12 per BOU for penicillin, a drop of 1/3, compared with US$18 per BOU, its peak price this year.
   This cycle for penicillin industrial salts experienced its turning point in the third quarter this year, with prices going down and inventory piling up, while purchasers make many more inquiries than orders for goods. In such a serious situation, producers can survive only by competitive edge.