Jinan Zhuocheng Bio-Tech Co., Ltd.

Since the beginning of 2026, China’s veterinary active pharmaceutical ingredient (API) industry has been undergoing a period of significant structural adjustment. Rising costs for agricultural commodities, basic chemicals and energy, together with increasingly stringent environmental and compliance requirements, are reshaping the supply side of the industry. At the same time, some API products continue to face overcapacity and price competition, while livestock demand is gradually recovering and the companion animal pharmaceutical market continues to expand.

Against this backdrop, competition in the veterinary API industry is gradually shifting away from simple capacity expansion toward production efficiency, process technology, quality consistency, regulatory compliance and supply-chain capabilities.

Rising Upstream Costs and Stricter Environmental Requirements

Veterinary API production costs are closely linked to agricultural commodities, basic chemical materials and energy prices.

For certain macrolide APIs, for example, fermentation processes rely on raw materials such as corn starch and soybean meal as carbon and nitrogen sources, while chemical auxiliaries such as tartaric acid are also involved. Energy costs, including coal, natural gas and electricity, directly affect fermentation, concentration, extraction and drying processes.

For some fermentation-based APIs, energy costs account for approximately 10%–15% of total production costs. When raw material and energy prices remain elevated, manufacturers face increasing pressure on their cost structures.

Environmental compliance has also become an important factor affecting industry supply. Requirements for the treatment of waste gas, wastewater and solid waste are becoming increasingly stringent. API manufacturers are therefore required to continue investing in environmental protection facilities, upgrading waste-treatment technologies and strengthening environmental management throughout the production process.

For manufacturers with inadequate environmental infrastructure or limited compliance capabilities, stricter requirements may result in production suspension, rectification or market exit. In contrast, companies with established production facilities, quality management systems and environmental capabilities are better positioned to maintain stable operations and supply.

Overcapacity and Product Differentiation in the Manufacturing Segment

The veterinary API industry continues to face overcapacity in certain product categories.

Florfenicol is one example. Domestic nominal production capacity has exceeded 16,000 tonnes per year, while global demand is estimated at around 10,000 tonnes. The continued adoption of new production technologies has improved manufacturing efficiency and reduced production costs in some cases, intensifying market competition.

At the same time, significant differences are emerging among individual API products.

During the first half of 2026, overall veterinary API prices remained under pressure, but some products performed very differently. Mepiquat-related veterinary drug products, for example, recorded a reported price increase of 35.96%, while tylosin tartrate declined by 11.19%. Differences in supply-demand conditions, production costs, inventory levels and purchasing cycles contributed to the divergence in market performance.

Corporate earnings also reflect this trend. During the first half of 2026, several listed animal-health and pharmaceutical companies achieved revenue growth, while their net profits declined. Guobang Pharma reported a 25.07% year-on-year decline in attributable net profit, while Puluo Pharmaceutical and Sinopharm Modern reported declines of 7.22% and 58.99%, respectively.

These figures indicate that simply increasing production and sales volumes does not necessarily translate into stronger profitability in an increasingly competitive market.

By comparison, companies with differentiated products, technological advantages and economies of scale have demonstrated greater resilience. H1 2026 results from Huisheng Bio-Tech, for example, showed a 75.59% year-on-year increase in attributable net profit. Its tylvalosin tartrate API reportedly holds more than 50% of the relevant market, while the gross margin of its API business increased from 33.00% to 47.91%.

This highlights an important trend: strain efficiency, production technology, cost control, consistent quality and large-scale manufacturing are becoming increasingly important sources of competitiveness in the veterinary API industry.

Changing Demand Across Livestock and Companion Animal Markets

On the demand side, traditional livestock pharmaceuticals and companion animal healthcare are developing along increasingly differentiated paths.

Demand from the livestock sector remains influenced by factors such as farm profitability, feed costs and livestock prices. However, the continued development of large-scale and intensive farming is increasing the importance of disease prevention, animal health management and biosecurity.

In poultry production, for example, the need for ongoing control of diseases such as coccidiosis and respiratory infections provides relatively stable demand for relevant anti-infective and antiparasitic APIs.

Export demand is also influencing domestic supply conditions for certain products. For example, some manufacturers of colistin sulfate have prioritized overseas orders, contributing to tighter availability in the domestic market at certain periods.

Meanwhile, the companion animal pharmaceutical market is emerging as another important growth area.

As pet ownership increases and veterinary healthcare consumption becomes more sophisticated in China, demand for treatment of chronic diseases, preventive healthcare and specialized veterinary medicines is continuing to develop. The growth of companion animal pharmaceuticals is also raising requirements for API quality standards, product safety and compatibility with finished-dose formulations.

As a result, future demand for veterinary APIs is likely to become increasingly diversified, with livestock pharmaceuticals, export markets and companion animal healthcare all contributing to industry growth.

Stronger Regulation Is Reshaping Veterinary Pharmaceutical Distribution

In addition to environmental regulation on the manufacturing side, regulatory oversight of veterinary drug distribution and use is also becoming more stringent.

In 2026, relevant authorities continued to strengthen regulatory measures covering veterinary drug use and distribution, with increased attention to unauthorized online sales, unqualified operators and product traceability. The implementation of QR-code-based veterinary drug traceability systems is also contributing to a more standardized distribution environment.

For API manufacturers, stronger regulation means that customer qualification, product documentation, batch traceability, quality management and supply-chain compliance are becoming increasingly important.

For international markets, product quality standards, registration documentation, testing reports, supply stability and export compliance are also becoming important factors when overseas customers evaluate API suppliers.

Competition in the veterinary API market is therefore gradually expanding beyond price to include quality, compliance, technology, delivery performance and overall supply capability.

From Capacity Expansion to Comprehensive Competitiveness

Looking across the entire value chain, the veterinary API market in 2026 is characterized by several key developments: rising upstream costs, increasingly stringent environmental requirements, overcapacity in selected product categories, stronger differentiation among APIs, gradual adjustments in livestock demand, and new growth opportunities in companion animal healthcare and international markets.

Under these conditions, the future competitive landscape will depend less on simply producing larger volumes and more on the ability to manufacture high-quality products efficiently, consistently and compliantly.

For veterinary API manufacturers, continuous process optimization, higher production efficiency, stronger quality control, upgraded environmental facilities and improved international customer service will be important for responding to changing market conditions.

As the industry enters a period of structural adjustment, inefficient, low-value-added and non-compliant capacity is likely to face increasing pressure, while manufacturers with advantages in technology, quality, cost control and supply-chain management may gain greater opportunities.

As an important link connecting upstream chemical and biotechnology industries with downstream veterinary formulations and animal-health markets, the value of veterinary APIs is evolving from simply supplying basic raw materials toward delivering reliable quality and integrated supply-chain capabilities.

Looking ahead, continued development in livestock health management, companion animal healthcare and the global animal-health market is expected to create further opportunities for the veterinary API industry. For industry participants, continuously improving product quality, manufacturing efficiency and international service capabilities will be essential to meeting the requirements of the next stage of market development.