| By Cindy Wu, Asia Manufacturing Pharma |
| Monday, 18 May 2009 |
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China has experienced a continuing slowdown in exports of aspirin since 2003 when exports of the drug totaled nearly 9,000 tons, with the amount having declined to 6,337 tons in 2008, a fall of 9.39 percent over 6,989 tons in 2007, this mainly due to the changes arising from changes in the operating environment for domestic
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aspirin producers and an increasing number of international barriers to entry. The country's three major producers of aspirin including Shandong Xinhua Pharmaceutical, Nanjing Pharmaceutical Factory and Jilin Pharmaceutical have long been the market’s largest aspirin exporters, with combined exports accounting for 95 per cent of the country’s total, and each having a production capacity exceeding 3,500 tons.
However, they could not longer sit on their laurels. Two of the three state-owned makers over the recent years have been compelled to shift their manufacturing facilities located in downtown areas to the suburbs due to municipally issued environmental edicts.
The move consequently brought about higher fixed capital investments and increasing expenses associated with relocation, leading to a drop in production, a double whammy when combined with high |
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spending related to environmental protection and a large drop in export rebate rates.
In the meantime, the new landscape also provides opportunities for many low-cost emerging players mainly located in central and western China to inject more investment and scale up their production capabilities, in a move to offset the market supply shortage.
Though the new entrants can’t yet compete against the state-owned makers in terms of production technologies and qualities, their production and exports of the drug are expected to maintain an upward trend.
More international trade barriers to entry
Europe and North America are the world’s two largest aspirin export destinations with consumption accounting for nearly two thirds of the worldwide total. However, developed countries in the two regions have imposed more stringent restrictions for the export of aspirin over recent years, putting Chinese aspirin exports in a squeeze.
The U.K., for example, has started applying a new advanced chemical testing approach involving high pressure liquid chromatography on imported aspirin to greatly improve the regulation for the drug’s quality. An increasing number of anti - |
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dumping investigations against China’s exported aspirin have put more pressure on exports of the drug.
In addition, The EU-approved REACH appears to be the country’s largest trade barrier since its entry into the World Trade Organization. Under the regulation, Chinese domestic drug makers must assume all costs related to substance examinations and registrations, leading to larger production costs for the country’s aspirin producers.
Despite the approximate 150 billion tablets consumed annually, the global aspirin market still has room for further major expansion. In order to deal with the current tough operating environment, Chinese aspirin producers need to change their production strategies to focus on innovative technologies and environmentally-friendly processes.
Industry consolidation resulting in one or two large-scale aspirin producers to better compete with leading makers in other markets is essential to the future success of the sector.
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