Jinan Zhuocheng Bio-Tech Co., Ltd.

The supply chain disruptions triggered by geopolitical conflicts are pushing the global API (Active Pharmaceutical Ingredient) industry into an unprecedented strategic stress test. From the narrow waterways of the Persian Gulf to Dubai's air cargo hub, and further to the foreign exchange market for the Indian rupee, a chain reaction set off by crude oil supply interruptions is cascading down the chemical industry supply chain to the very end of pharmaceutical manufacturing. Methanol supply cuts, soaring air freight costs, and currency devaluation—three shocks are fermenting simultaneously.

Why has the API industry been drawn into the vortex of this crisis? The answer lies in a fundamental logic: the essence of the API supply chain is a massive industrial pyramid built upon oil and natural gas. The pharmaceutical industry is not independent of the petrochemical sector, but rather an important downstream extension of it. The globalized industrial chain runs top-down as follows: crude oil and natural gas, basic chemical raw materials (such as methanol, sulfur, liquefied petroleum gas), intermediates, fine chemicals, and finally APIs. When the "source of living water" upstream is obstructed, every downstream level faces mounting pressure.

The impact of this crisis on the API industry unfolds along at least three intertwined transmission paths, creating a multi-resonance effect of "cost-push, logistics obstruction, and exchange rate squeeze."

The first transmission path comes from the supply cuts and price surges of basic chemical raw materials. Methanol is the first variety to be "choked." Iran is the world's second-largest methanol producer, accounting for nearly 10% of total global capacity, while China's methanol imports from the Middle East account for as high as 70%, with Iran alone representing 60%. As key straits were forced to close and operational uncertainty at Iranian facilities surged, methanol prices rose sharply at the March market opening. As an upstream cornerstone for pharmaceutical intermediate synthesis, the price spike in methanol directly pushed up production costs for herbicides, insecticides, and other pesticide technical materials, as well as numerous pharmaceutical intermediates. At the same time, the rise in sulfur prices is equally worthy of high vigilance. Sulfur is a core raw material for sulfuric acid, which plays an indispensable role in pharmaceutical intermediate production. Its price increase will cascade down the supply chain to the API manufacturing stage.

The second transmission path comes from the obstruction of logistics channels and the explosion in air freight prices. If basic chemical raw material price increases represent chronic blood loss, then logistics disruptions constitute a more direct shock. The Middle East conflict has grounded core air cargo hubs including Dubai, Abu Dhabi, and Doha. These airports were originally important trade and transportation nodes connecting Europe, Asia, and Africa. Data shows that more than one-fifth of global air freight flight volumes were grounded during this period. Air freight prices have consequently soared, with some routes seeing increases as high as 70%. Spot rates from South Asia to Europe surged from $2.57 per kilogram to $4.37 per kilogram. Aviation fuel prices have also risen sharply, and with the superimposition of war risk premiums, logistics costs are escalating exponentially.

The third transmission path comes from currency devaluation at the financial level. When the dual squeeze of supply and logistics leaves enterprises gasping for air, the exchange rate shock becomes the final straw that breaks the camel's back. In late March 2026, the Indian rupee to US dollar exchange rate fell to a historic low above 94, with a depreciation of more than 30%. At the same time, expectations of Federal Reserve interest rate hikes are warming, with the global interest rate center projected to rise above 5% in the coming months, which will significantly drag on global economic growth. For emerging market API exporting countries represented by India, while local currency depreciation benefits exports to a certain extent, the substantial rise in imported raw material costs is eroding this advantage.

Under the impact of multiple shocks, API industries in different countries and regions show clear divergent trends. From the cost perspective, China possesses relatively unique advantages. Data shows that approximately 78% of China's APIs rely on domestic production, and domestic coal self-sufficiency has long remained above 92%. While international API prices have surged 70% due to natural gas supply disruptions, skyrocketing from $400 per ton to $700–$800 per ton, China's domestic API prices are only one-third of international market levels. This cost differential means Chinese enterprises have greater buffer space in global API competition.

Meanwhile, India's pharmaceutical exports have already suffered substantive losses. According to data from the Pharmaceutical Export Promotion Council of India, in the 2024–2025 fiscal year alone, India's total pharmaceutical exports to West Asia and North Africa reached $1.75 billion, accounting for approximately 5.7% of its total global pharmaceutical exports. Affected by this conflict, pharmaceutical export losses in just three months could reach 250–500 billion rupees, or approximately $300–600 million.

Taken together, the API supply chain crisis triggered by geopolitical conflicts has a transmission mechanism far more complex than a simple oil price surge. Cost-push, logistics obstruction, and exchange rate squeeze are superimposed upon one another, creating an unprecedented multi-resonance effect. For Chinese API enterprises, while they face cost pressure from rising upstream chemical raw material prices in the short term, compared to international competitors, a relatively stable domestic energy supply system, high raw material self-sufficiency rates, and a complete industrial chain supporting system are becoming important risk-resistance barriers.

Despite the numerous challenges facing the global API supply chain, crises also contain structural opportunities. By optimizing supply chain management, strengthening international cooperation, and enhancing technological R&D capabilities, the API industrial chain is expected to usher in a new development landscape amid the turbulence. Asia Pacific Easy and Analysis will continue to monitor developments and provide timely, professional market insights for the industry.