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, the five major domestic 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 session, the "Big Five" reportedly reached an agreement to limit production and stabilize prices, setting a minimum price for bulk penicillin industrial salt. However, as reporters dug deeper, it became clear that industry insiders remain skeptical about the feasibility of such measures. A senior executive from North China Pharmaceuticals revealed that the 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 total production. While it’s theoretically possible for these firms to control pricing if they stick to their commitments, the situation is far more complex. Penicillin industrial salt is one of the largest categories of raw material drugs in China. In recent years, the sector has seen massive expansion and chaotic competition, leading to severe market pressure both domestically and internationally. Since last year, new projects have been launched by several major players, including Shijiazhuang's 10,000-ton antibiotic project in Inner Mongolia, Pengzhou's 3,000-ton industrial salt facility, and Huaxing's Phase 5 industrial salt project. This surge in supply has led to intense competition, declining prices, and a deepening crisis. The average FOB export price of penicillin industrial salt has dropped from $18 per BOU in the early 1990s to just $6.27 per BOU in July this year—a nearly 70% decline. Domestically, prices have fallen every month since the start of the year, squeezing profit margins across the board. Internationally, the situation is no better. China's penicillin industrial salt is heavily reliant on exports, but global supply exceeds demand. According to the China Chamber of Commerce for the Import and Export of Medicines and Health Products, the world's current production capacity far surpasses actual consumption levels. Adding to the challenges, Chinese manufacturers have faced anti-dumping investigations abroad due to aggressive low-cost exports. In 2004, India initiated a "transitional protection clause" targeting specific products, which significantly impacted Chinese exports. In 2003, over 70% of China's penicillin industrial salt exports went to India. The resulting import suspension dealt a heavy blow to the industry, triggering a widespread crisis. In response, the five major producers have turned to limited production and price stabilization strategies. Yet, when journalists reached out to the companies involved, most were either uncooperative or denied any such agreement. A representative from Shijiazhuang Pharmaceutical flatly denied the existence of a consensus. Meanwhile, officials at North China Pharmaceutical's news center cited sensitivity as a reason for not commenting before official results were released. Another company executive suggested that the plan might be difficult to implement. An industry expert who has studied the market for years noted that the Big Five are unlikely to openly commit to production limits because they know how hard it is to enforce such agreements. Last year, the China Chamber of Commerce convened multiple meetings to discuss pricing and self-regulation, leading to a "self-discipline agreement." But the deal collapsed when one major player refused to comply. "This is similar to previous attempts, but nothing ever works," said a factory representative who attended one of the meetings. Industry sources added that the profit margins on penicillin industrial salt are extremely thin. After years of price wars, export prices have plummeted. Even companies like Henan Xinxiang Huaxing, which claims to have the lowest costs, are operating at a loss. Despite this, China's penicillin industrial salt exports increased by 45.58% last year. Instead of reducing production, companies are expanding, leading to more losses. Some manufacturers are even engaging in price wars to eliminate competitors and gain market dominance. Given this environment, it's no surprise that the Big Five are skeptical about the success of their limited production strategy. The industry remains in turmoil, with no clear path forward.

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