Jinan Zhuocheng Bio-Tech Co., Ltd.

Over the past month or so, the "price surge" triggered by tight global crude oil supply has spread from the energy market to the API (Active Pharmaceutical Ingredient) industry at the end of the pharmaceutical supply chain. Escalating geopolitical conflicts in the Middle East pushed oil prices past $100 per barrel at one point, with cost pressures cascading down the chain. Prices of Vitamins A and E have nearly doubled within a month, sartan-class APIs are showing initial signs of a price inflection, while hormone-based varieties remain generally stable. After a prolonged period of capacity rationalization, the industry is entering a window of structural price recovery.

I. The Initial Shock: Cost Pressure Cascading Down the Supply Chain

At the end of February 2026, geopolitical conflicts in the Middle East escalated abruptly, forcing the closure of a critical strait. Following the disruption of this channel, which handles approximately 20 million barrels per day of global crude oil transportation, the global crude oil supply gap rapidly expanded to about 5 million barrels per day.

As a result, the average WTI crude oil price in March surged 41% month-over-month, peaking at $102.88 per barrel. Guosen Securities judges that oil prices may accelerate further in April, potentially exceeding $120 per barrel in the short term, and has raised its 2026 average price forecasts for Brent and WTI crude to $80–$90 per barrel.

Oil price volatility transmits downward along the chemical industry supply chain. In March, the petrochemical industry prosperity index rose 2.49 percentage points month-over-month, but divergence between upstream and downstream was significant: upstream oil and gas extraction saw a substantial recovery in prosperity, while mid- and downstream chemical raw materials and chemical products manufacturing saw their prosperity indices decline due to weak end-demand and poor cost pass-through. This indicates that the cost pressure from rising crude oil prices is accumulating in the mid- and downstream sectors, and pharmaceutical intermediates and APIs sit precisely at the end of this transmission chain.

II. First to "Take the Baton": Vitamin A and E Prices Double

In this round of cost transmission, vitamins became the first category to sense the "change in water temperature."

According to Choice data, the price of Vitamin A rose from 60.50 yuan/kg on February 27 to 116.50 yuan/kg on April 17, a gain of approximately 93% in just over a month; Vitamin E rose from 57.50 yuan/kg to 116.50 yuan/kg during the same period, an increase of nearly 100%.

Kaiyuan Securities analysis points out that the global vitamin industry is mainly supplied by DSM, BASF, and Chinese companies. Against the backdrop of continuously rising crude oil prices, leading companies collectively suspended quotations and signings, driving a rapid spike in Vitamin A and E prices.

China Post Securities further explains that vitamin API prices were at historical lows before the increase. Rising costs for upstream chemical raw materials and oil transportation prices simultaneously stimulated strong willingness within the industry to control production and raise prices. More critically, vitamins are primarily used as feed additives, accounting for an extremely low proportion of total feed costs, making downstream users insensitive to price changes. This has made the price-raising process exceptionally smooth, with greater room for price increases.

The capital market reacted equally swiftly. Shares of A-share vitamin leader NHU have accumulated a gain of nearly 40% year-to-date. The company stated in its March investor communication that it is controlling costs through strategic procurement and long-term agreement cooperation, and that market prices for its main products have risen recently. CITIC Securities research also notes that with new capacity coming online at NHU in 2026, combined with overseas supply disruptions, methionine is expected to see both volume and price increases.

III. Structural Transmission: Sartans Show Initial Inflection, Hormones Remain Calm

Beyond vitamins, sartan-class drugs are another "price increase potential stock" attracting significant attention. A-share sartan API company Menovo has seen its shares accumulate a staggering 173.02% gain year-to-date, ranking first in the sector.

On April 21, a relevant person from Menovo's Board Secretary office told media that the intermediates and basic raw materials required for the company's API production are mainly sourced domestically. Indirectly affected by rising crude oil prices, they are already showing an upward price trend.

More importantly, the supply-side landscape is changing. Menovo revealed in its March 20 investor communication that capacity among major sartan API manufacturers is no longer in excess. Cost-side items such as bromine have already risen in price, some sartan product prices are showing signs of turning upward, and the company judges that "resistance to reasonable price increases is relatively low."

However, not all APIs can enjoy the benefits of this round of price increases. Although Tianjin Tianyao Pharmaceutical's shares have gained 54% year-to-date, the company explicitly stated in a risk warning announcement that corticosteroid API prices remain generally stable and currently have no impact on the company's operating performance.

This divergence clearly illustrates that the cost transmission from rising crude oil prices is not "equal for all." Whether prices can be smoothly raised depends fundamentally on each category's own supply-demand dynamics, downstream price sensitivity, and the thoroughness of industry capacity rationalization.

IV. Industry Inflection: Supply Rationalization Superimposed with Cost Drivers

In the view of many brokerages, the API industry is currently in a window where multiple factors are resonating.

Kaiyuan Securities points out that after a relatively long cycle of supply rationalization, the domestic API industry is poised to enter a new round of price increases as geopolitical tensions drive continuous rises in crude oil and upstream chemical raw material prices. It recommends focusing on targets with thorough supply rationalization and clear price increase expectations.

From a category-specific perspective, the antibiotic supply chain has been the first to stabilize and recover. Prices of 6-APA and penicillin industrial salt have clearly bottomed out and rebounded, while downstream APIs such as amoxicillin are also in a recovery channel. In the animal health API segment, average prices for some varieties have fallen sharply from highs, with some companies posting consecutive losses, accelerating industry rationalization. Prices are expected to see cyclical recovery in 2026.

Pulu Pharmaceutical provided more frontline information in its April 20 investor call: in the initial phase of this international incident, basic raw materials rose by an average of 10% to 15%. The company communicated with customers immediately, largely absorbing the price increase impact, and product price increases have already covered costs. The company outlooks that as domestic capacity reduction continues, new entrants decrease, and competition becomes more rational, API prices are expected to continue a slow recovery, with the industry gradually improving in the second and third quarters.

V. Conclusion: Structural Opportunities Outperform Broad-based Rallies

Taken together, the impact of rising crude oil prices on the API industry is gradually becoming apparent, but the transmission process exhibits three distinct characteristics: First, significant category divergence, with vitamins and similar categories experiencing smooth price increases while hormones and others remain generally stable; second, a time-lag effect, as transmission from crude oil to APIs requires multiple stages, with bargaining room at each link; and third, supply-side factors are crucial—the more thorough the capacity rationalization, the lower the resistance to price increases.

Asia Pacific Easy and Analysis believes that rather than betting on the broad logic that "rising crude oil prices benefit the entire API sector," it may be more rational to conduct in-depth analysis of the supply-demand dynamics and competitive structure of different categories, seeking out niche segments with thorough supply rationalization and smooth cost transmission.