The disorderly expansion led to the predicament of avalanche in the overcapacity price, and penicillin industrial salt production enterprises agreed the market price. But: Will the Big Five limit production insured prices?

On September 2, five of China's leading manufacturers of penicillin industrial salt—Huabei Pharmaceutical, Harbin Pharmaceutical, Lukang Pharmaceutical, Shijiazhuang Pharmaceutical, and Huaxing Pharmaceutical—gathered in Inner Mongolia for a market coordination meeting. During the gathering, the "Big Five" reportedly reached an agreement to limit production and stabilize prices, setting a minimum bulk price for their products. However, as reporters began investigating the matter, industry insiders expressed skepticism about the feasibility of such a plan. According to a representative from North China Pharmaceutical, the total national output of penicillin industrial salt in the first half of this year was approximately 13,000 tons, with the top three companies—Huaxing, Shijiazhuang, and North China—accounting for over 70% of the total. While it may seem logical that if these giants stick to their commitments, price control could be achievable, the reality is far more complex. Penicillin industrial salt is one of the most significant raw materials in China’s pharmaceutical sector. In recent years, rapid expansion and uncontrolled competition have led to severe oversupply in both domestic and international markets. The situation has only worsened with the launch of new production projects by several major players, including Shijiazhuang’s 10,000-ton phase I antibiotic project in Inner Mongolia, Pengzhou’s 3,000-ton facility in Sichuan, and Huaxing Pharmaceutical’s fifth phase industrial salt plant. This surge in supply has intensified competition and driven prices down sharply. The average FOB export price of penicillin industrial salt has dropped from around $18/BOU in the early 1990s to just $6.27/BOU by July this year—a decline of nearly 70%. Domestically, prices have been falling month by month since the start of the year. Internationally, the situation is no better, as global production capacity exceeds actual demand, leading to further downward pressure on prices. Adding to the challenges, Chinese manufacturers have faced anti-dumping investigations abroad due to low-cost exports. For example, in July 2004, India imposed a disguised "transitional protection clause" on specific products, which significantly impacted China’s exports. In 2003, over 70% of China’s penicillin industrial salt exports went to India, but the import suspension caused by the investigation dealt a heavy blow to the industry, triggering a broader crisis. In response, the five major manufacturers attempted to implement a coordinated strategy to limit production and protect prices. However, when reporters approached the companies for confirmation, most were either unaware of the arrangement or refused to comment, citing sensitivity. An industry expert noted that while the Big Five have tried similar measures before, they often fail due to lack of enforcement and internal resistance. In fact, earlier last year, the China Chamber of Commerce for Medicines and Health Products convened multiple meetings to discuss pricing and self-regulation, resulting in a self-discipline agreement. But the pact collapsed when one company refused to comply. Industry sources also pointed out that the profit margins on penicillin industrial salt are extremely thin. Even companies with the lowest costs, like Henan Xinxiang Huaxing Pharmaceutical, are operating at a loss. Despite this, Chinese exports of the product have continued to grow, with a 45.58% increase reported last year. Instead of reducing production, many companies are expanding their capacity, engaging in aggressive price wars to gain market share. This competitive mindset makes it unlikely that the latest coordinated effort will succeed. As one factory representative put it, “This is similar to previous attempts, but nothing ever really works.” With so many players chasing market dominance, the path to sustainable stability remains uncertain.

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