Jinan Zhuocheng Bio-Tech Co., Ltd.

Since April, the operating logic of the veterinary active pharmaceutical ingredient (API) market has shifted significantly. Industry monitoring data shows that market inquiry and procurement activity have cooled notably compared to earlier periods, while holders' reluctance to sell is gradually easing. The market is moving from sentiment-driven to rational pricing, with supply and demand fundamentals reasserting themselves as the dominant factor. However, the current market presents a complex pattern of three coexisting forces: "rising costs, weak demand, and ample supply." The direction of veterinary APIs has become a focal point for the entire industry chain.

Cost-Side Pressures Are Real, but Transmission to End Users Is Hindered

Rising costs are the most direct driver of this market shift. Internationally, ongoing instability in the Middle East has kept oil prices relatively high, with cumulative gains from geopolitical conflicts still significant. Domestically, refined oil prices continue to rise, driving up logistics and transportation costs.

The impact of high oil prices is multidimensional. It not only pushes up prices for basic energy and chemical raw materials but also drives up costs in transportation, packaging, and other links. For example, for a mainstream antiparasitic API, prices of agricultural products such as corn and soybean meal, as well as key chemical intermediates, continue to rise. Coal and natural gas prices remain high, and environmental protection costs are increasing rigidly. Market quotations for this category have broken through key psychological thresholds.

However, downstream acceptance of high prices is generally low, and the transmission of costs to end users is not smooth. Industry insiders suggest that the post-holiday rise in API prices was partly driven by sentiment linked to rising oil prices amid geopolitical tensions. Mid- and downstream players have gradually adapted to the current rhythm and are becoming more cautious in their purchasing.

Sustained Pressure on the Livestock Sector Weighs Heavily on Demand

Whether costs can be effectively transmitted depends critically on the demand side's ability to absorb them. Currently, the demand outlook is far from optimistic.

Recently, the main futures contract for live hogs has continued to decline, and the hog-to-corn ratio has remained in the excessive-prolapse first-level alert zone for several consecutive weeks. The livestock sector remains sluggish, with end users resisting high prices. Procurement is limited to essential needs, with a "buy as needed, keep low inventory" strategy prevailing. There is little willingness to build large inventories, and demand-side support is clearly weak.

Structurally, the rate of large-scale farming in China has surpassed a key threshold. Large livestock groups, with their strong bargaining power, have significantly lowered procurement prices through centralized bidding and long-term agreements. At the same time, the policy direction of "reducing and limiting antibiotic use" continues to deepen, compressing the market space for therapeutic products while raising the strategic status of preventive and antibiotic-alternative products. Some traditional high-volume products have seen continuous market contraction due to sluggish livestock markets and competition from compound formulations.

Ample Overall Supply, but Increasing Differentiation Among Categories

Currently, ample supply is a reality in the veterinary API market. Several leading enterprises are investing in synthetic biology smart manufacturing projects or capacity expansion projects, with significant new capacity expected to come online over the next two years. Against the backdrop of shrinking demand, competition among companies for orders is intensifying.

However, the supply side is not monolithic. Prices of some mainstream categories have fallen from highs to historical lows, even dropping below production costs, accelerating industry shakeouts. Environmental policies continue to tighten, driving the exit of outdated capacity, while the implementation of new production quality management standards has sharply reduced the number of companies in the sector. Notably, leading enterprises are shifting capacity toward downstream high-end derivatives, leading to a contraction in basic API capacity. At the same time, major manufacturers are clearly intent on supporting prices, with some varieties seeing strong upward price movements due to controlled supply strategies. This pattern of "ample overall supply but structural differentiation" marks a new phase of category divergence in the market.

International Market: China's Role and Global Opportunities

Broadening the perspective to the global market, fluctuations in China's veterinary API market are not an isolated phenomenon. Industry research shows that the global veterinary API market is expected to continue growing, with a double-digit compound annual growth rate. Key drivers include the acceleration of large-scale livestock farming in developing countries, the rise of the global pet economy, and growing demand for antibiotic alternatives.

China is the world's largest producer and exporter of veterinary APIs, dominating global markets for antibiotics, antipyretics and analgesics, and antiparasitics. However, in recent years, China has faced dual pressures: cost competition from emerging producers such as India and Vietnam, as well as rising green barriers and quality standards in European and American markets. Some international buyers are beginning to adopt a "China + 1" supply chain diversification strategy, which raises the bar for Chinese companies' international strategies.

At the same time, emerging markets in Southeast Asia, Latin America, and Africa are seeing rapid growth in demand for basic APIs, while European and American markets continue to expand demand for high-end formulations and pet medications. These trends offer Chinese companies differentiated paths to going global.

Market Outlook: Short-Term Volatility and Divergence, Medium-to-Long-Term Structural Transformation

Synthesizing the three forces at play, industry insiders offer the following judgment on market direction:

In the short term, the market will likely move within a range, with category divergence intensifying. Market drivers are shifting from "cost + sentiment" to "cost + supply and demand." Some categories, supported by cost pressures and manufacturers' price-supporting strategies, will see continued price increases, while others may experience modest price declines due to weak demand.

In the medium to long term, cyclical recovery and structural divergence will proceed in parallel. Continued global demand growth provides medium- to long-term support, but total domestic demand is expected to continue shrinking, with intensifying structural divergence among product categories. Industry value is shifting from bulk APIs to high-end segments, with API-to-formulation integration becoming the dominant business model. Pet medications, traditional Chinese veterinary medicines, and veterinary biologics will become core growth areas.

Fcing this complex market landscape, participants at different stages of the chain need to adopt differentiated strategies.

For veterinary API manufacturers, the era of blind capacity expansion is over. Future competition should shift from scale to quality and technology. By leveraging synthetic biology and other technological routes to improve process conversion rates and lower production costs, companies can enhance product competitiveness from the source in the context of regulatory trends toward "low-toxicity, low-residue" products.

For veterinary formulation companies and distributors, the biggest challenge is balancing high costs with downstream pressure. It is recommended to establish a category-based tiered procurement mechanism, setting different inventory cycles and safety thresholds for different products. At the same time, pay attention to category divergence trends, evaluate each case individually, abandon one-way thinking, and return to a demand-based procurement approach.

For companies looking to expand internationally, it is advisable to shift from low-price exports to compliant, brand-driven globalization. Proactively align with international standards such as the EU's EMA, the US FDA, and Japan's MAFF, while also paying attention to emerging markets along the Belt and Road, especially regions with rapidly growing livestock sectors such as Southeast Asia, the Middle East, and Africa.

For livestock producers, against the backdrop of low hog prices and high cost pressures, the "buy as needed, keep low inventory" strategy will likely continue in the short term. However, it is important to note that the cost pressures arising from high oil prices are real. The era of low prices may already be history, and excessive waiting for lower prices could mean missing procurement opportunities.

In 2026, the veterinary API market is undergoing a profound "stress test." Under these three pressures, the market will not see a simple one-way trend but will instead enter a structural adjustment period characterized by category divergence and survival of the fittest. For companies in this space, abandoning speculative thinking about price direction and building more refined, agile operational capabilities may be the key to finding certainty amid uncertainty.

Disclaimer: This analysis is based on publicly available market information and is for reference only. It does not constitute specific operational advice. Markets involve risks, and decisions should be made with caution.