China’s power crisis - blessing for Indian APIs?

Megha Lodha - Mumbai

The Indian pharmaceutical industry could heave a sigh of relief going by the news of China currently facing a severe power crunch, the worst in the last 25 years. An industrial slow down has already begun and the power situation is likely to aggravate due to increase in demand, lower power generation and high temperatures. Production of chemicals apart from other goods like textiles and steel, to name a few have reportedly declined.

Provinces of Hangzou and Wuhan that have a concentration of intermediates and APIs have been facing power shortage for the last three months and units are shut for two to three days per week in certain areas. It is reliably learnt that since July prices of APIs have marked their upward spiral. Prices of drugs like metronidazole and diclofenac have gone up by about 40 to 50 per cent and are currently quoted at $ 7.0 and $ 5.5 per kg from their low of $ 4.25 and $ 4.0 respectively.

With the pharmaceutical industry in China badly affected due to power crisis as well as higher raw material costs, some committed shipments have been affected and analysts here believe that buyers from EU would inevitably turn to India for their APIs. India is the next best alternative and the power crunch in China is an opportunity for Indian API manufacturers.

China is currently facing power shortage of around 30,000 MW. Twenty-five of 31 states in China are facing power cuts. The power consumption has increased substantially due to higher demand from domestic consumers. The period of July-October is summer season in China.

Airing his views on this situation, Yogin Majmudar, president of the Indian Drug Manufacturers’ Association (IDMA) said that since China has a vast capacity to manufacture intermediates, and bulk drugs, even if they were to halve production, there would arise no need for them to immediately import anything. On a more optimistic note, he said, ‘‘This is definitely good news for India as before the domestic sale gets curtailed there, it would be the exports where the curtailment will take place.’’ If this is the case, on a more personal note, he said this will be an indirect benefit to India in terms of lesser competition in the overseas market. Apart from that, the cheap imports from China that enter the Indian markets would come down, which, in turn, would give a shot in the arm to the ailing Indian bulk drugs industry.

Express Pharma Pulse has learnt that the power shortage in some states is around 30 per cent, and will take three years to normalise. Three thousand industrial units have been ordered shutdown for one week in August due to high temperature in the Shanghai district.

China is in the process of setting the additional power plants. Most of the power plants in China are coal based which has lead to higher pollution. The requirement of coal is met by imports. Transporting coal from the ports to the power plant is also involves efficient logistics. The power requirement in China is likely to double in next 15 years.