China’s grip on Europe’s antibiotics

AI Summary

China’s dominance of penicillin and antibiotic ingredient production is putting Europe’s remaining fully integrated penicillin plant, Sandoz’s facility in Kundl, Austria, under commercial pressure. Sandoz is seeking an EU anti-dumping investigation and policy support, warning that the plant’s closure would leave Europe highly dependent on Chinese supply.

Kundl: Tucked away in the green foothills of the Austrian Alps, the last fully integrated European penicillin plant faces an uncertain future in the shadow of rising Chinese industrial power.The reason: China is churning out the same antibiotics and ingredients as the Sandoz factory in Kundl, Austria, at much lower cost for the European market.The falling prices are a boon for cost-conscious European governments' public healthcare programs but an existential threat to the Kundl site - the only one making penicillin from start to finish in Europe, including key active ingredients.After a number of peers announced they were closing or moving production to China, the plant has become a focal point for a widening debate about the West's self-sufficiency.And, just three years after a €200-million ($225-million) expansion that included €50 million of public funds, Sandoz has asked the European Commission to open an anti-dumping investigation that could result in tariff measures against Beijing.If the plant went out of business, Europe "would be fully dependent" on China, Kundl site manager Stephanie Jedner told Reuters in offices looking out over the plant's gleaming storage tanks, ringed by the Tyrolean Alps.Alexander Fleming discovered penicillin a century ago in London, and it remains the main antibiotic class for life-threatening infections. Today, the manufacturing of ingredients for some 1.5 billion daily doses Europe administers each year is dominated by China.China's share of EU imports of penicillins and their derivatives in mostly bulk active pharmaceutical ingredient (API) form has nearly doubled from 44% in 2019 to 86% last year, Eurostat data show, coinciding with Beijing's "Made in China" 10-year plan to move up the global manufacturing value chain.Meanwhile, Europe's exports of the same are today barely a fifth of their early 2000s peak.It's one example of how China has graduated from textiles and assembly plants to advanced manufacturing and traditionally European industries from pharmaceuticals to machine tools. With the EU goods trade deficit with China ballooning to around €1 billion per day in 2025, double the level of 2020, policymakers are scrambling for new measures to protect companies and jobs.Sandoz, in written evidence to British lawmakers earlier this year, said Kundl's capacity to supply Europe was "not commercially sustainable" unless governments paid more for penicillin. It argued that Beijing's control of the penicillin supply chain creates an "inherent strategic risk" akin to China's stranglehold on critical minerals."Antibiotic supply could feasibly become a tool of economic coercion or hybrid warfare, particularly during periods of diplomatic tension," Sandoz wrote in the submission to lawmakers, asking for more support.MEDICINE AS LEVERAGE IN TRADE WARSChina spent years establishing itself as a reliable supplier of essential medicines and is increasingly a player in cutting-edge pharmaceuticals. Sandoz says up to 90% of global antibiotic active ingredients are now produced outside Europe, mainly in China, or in India with Chinese chemicals."This is something that you should worry about," because China's market power gives it leverage to defend strategic interests, said Tim Ruhlig, a China analyst at EU foreign policy think tank, the European Union Institute for Security Studies.China could face reputational damage if it used such leverage. Unlike its near monopoly over rare-earth refining, Chinese policy does not frame power in the antibiotic market in national-security terms.Nonetheless, Chinese economist Daokui Li, a former member of the Chinese central bank's monetary policy committee, spooked Western nations during the COVID-19 pandemic when he suggested supplies of APIs should be on the table in trade disputes.One US official in China, speaking on condition of anonymity, told Reuters that Chinese counterparts had suggested in meetings that Beijing could cut off exports of APIs for some medicines as retaliation in a trade conflict.The Chinese foreign ministry said economic and trade differences with the EU could be resolved through dialogue and consultation. "China consistently opposes all forms of trade protectionism," it said in response to Reuters questions. The US State Department did not immediately provide comment.For European policymakers, the withering of such a strategic industry leaves the bloc vulnerable to restrictions on supplies during pandemics or conflicts, said Bostjan Ceh, head of business development at Labena, Slovenia-based pharmaceutical contract research and development firm."It would seriously compromise Europe's ability to cope with a health crisis," Ceh said.Only after the COVID-19 pandemic - when Europe noticed its dependence on Asian medical supplies - did policymakers begin treating pharmaceutical output as a strategic matter, said Anna Mihaylova, a policy expert at the Medical University of Plovdiv.Alarm bells sounded in 2022, when supplies of