This weekend, India was again in the global spotlight. The number of new COVID-19 diagnoses in India in the last three days is close to one million, more than six times that of Brazil, which has the second-highest number of diagnoses in the world.
Judging from the historical trend of new COVID-19 cases in India, the number of new cases in India has been gradually going out of control since April this year.
The Internet has been abuzz with reports of the tragic situation in India over the past two days. People are burning bodies in the streets, rich people are fleeing in private jets, and some foreign media are even calling it a “hell on earth”.
For India’s pandemic, we will not go into detail, the specific reasons are still the same.
Considering that Modi said in his speech on the 20th that India will not seal the country, it certainly adds another huge variable to the global fight against the pandemic.
What we would like to focus on here is what industries will be affected by the unexpected outbreak in India, and which will be reflected in the Chinese market.
At the moment, it seems that APIs and generics in the pharmaceutical industry are the most concerned areas, while industries including textiles, organic chemicals, machinery and equipment may also see some changes.
“India’s miracle drug” faces a reduction in production
Two years ago, the Chinese movie “Dying to Survive”, in which the protagonist went to India to buy cheap drugs to save lives, let the “Indian miracle drugs” known to everyone in China.
Indian APIs have always had a good reputation for quality and low prices in the global raw materials market, so its API market and exports are very well developed.
Public data show that India is the world’s second-largest supplier of APIs after the United States, accounting for 12% of the world.
Considering the existence of a large number of gray supply chains in India that are difficult to include in the statistics, the actual market share should be much higher than this figure.
Now that the pandemic in India has worsened again, some local pharmaceutical companies have shut down production, and the normal production of APIs will inevitably be affected, which will also exacerbate the global shortage of API supply.
India’s API market, exports accounted for nearly 50%.
And in March last year, due to the shortage of domestic supply, India has long announced restrictions on the export of some APIs.
In such a situation, the global supply of APIs will certainly appear gap, then China’s API industry has ushered in the opportunity to seize market share.
After the United States and India, China’s supply of APIs accounted for 9% of the world, ranking third.
China’s ever-tightening environmental policies in recent years, as well as the impact of pharmaceutical volume purchasing, the number of loss-making enterprises in the industry has grown significantly, and small and medium-sized API companies that are not competitive have gradually withdrawn from the market.
At the same time, China’s API industry, as one of the core directions of the new pharmaceutical manufacturing, has the dual growth of upgrading itself and undertaking the transfer of the global industry chain.
Even without considering the second outbreak of the pandemic in India, China itself is the biggest gainer from the global industrial transfer caused by the pandemic.
However, it should be noted that APIs have low margins in the pharmaceutical industry chain, and the valuation is not too high compared to that of innovative drugs. Investors should not be too happy.
Another opportunity for the textile industry
We shared with you the logic related to the textile sector last year when India shot up to the second largest pandemic country in the world for the first time.
India is the world’s largest producer of cotton and jute. The textile and apparel industry is one of India’s largest foreign exchange earners, with textiles alone accounting for about 15% of India’s total export earnings.
Due to the spread of the pandemic, several large Indian textile exporters were unable to secure regular deliveries starting last September. Several orders originally produced in India shifted to China, where the order volume of varieties including towels and bedsheets.
As the world’s largest textile producer, China has a complete textile industry chain. In addition, in the pandemic control has excellent performance, can be said to undertake India’s orders can not be a problem.
On the other hand, China’s cotton prices are lower compared to India, but also has the cost advantage of raw materials.
From the data at the beginning of this article, the pandemic in India has far exceeded the severity of the first outbreak last year. It is probable that the situation where textile companies have difficulty in starting work and delivering orders normally will be staged again.
Chinese loom start rate in last year continued to go high, the beginning of this year around the Chinese New Year into the maintenance shutdown period, the start rate once dropped to freezing point.
After a rapid recovery after the year, the start-up rate has recently fallen back slightly. As the order transfer is a lag, at present, the start rate continues to rise is expected to have emerged.
Considering the recent stimulating events related to the textile industry, such as the Xinjiang cotton event, the expectation for the release of multiple births, the boom in China’s textile industry is expected to further enhance.
At present, for example, the textile industry in the sub-sectors, such as home textiles, mother and child products and textile upstream and downstream will have certain opportunities.
However, it should be noted here is that although the probability of India’s orders will again appear to shift, but other Southeast Asian countries also have the ability to undertake these orders.
Including Vietnam, Pakistan, Bangladesh and other textile and apparel export data have recently seen growth. How much of India’s market share can be captured by China has some uncertainty.
These industries also need to keep an eye on
In addition to the two industries mentioned earlier, India is also a well-known global food exporter, with rice exports ranking first in the world.
When India’s first outbreak occurred last year, some people even said the world might be in a food crisis.
But from the point of view of India’s agricultural structure, the pandemic basically will not form much impact on its agriculture.
Because 99% of India’s arable land is concentrated in the hands of the so-called high-caste rich farmers, ordinary farmers have very limited arable land, the pandemic may be the impact on the 1% of crop production.
As for the manufacturing industry, India’s exports in recent years accounted for a significant increase in the proportion of chemical and mechanical transportation equipment.
These two industries are relatively large, which involves a very large number of sub-sectors.
Among chemicals, the largest exports are pharmaceutical products including APIs that we mentioned earlier, and others include organic chemicals, dyes, fertilizers, etc.
Machinery and transport equipment, including land vehicle equipment, power machinery and equipment.
All of these industries are likely to change because India’s production capacity is less than expected.
Finally, there is another industry that India is currently in dire need of, which is oxygen.
According to reports, hospitals across India are facing the dilemma of depleting medical resources such as hospital beds and medical oxygen and ventilators.
The soaring demand for medical oxygen has caused long lines to form in front of oxygen companies and even skyrocketing prices for oxygen.
China has now expressed its willingness to assist India, but whether India can swallow its pride and accept it is another matter.
Source: Ye Tan Finance