China boosts face mask production capacity by 450 per cent in a month, threatening a glut scenario
- Total daily capacity rose to 110 million from 20 million in February with 3,000 new entrants; China made half of the global output in 2019
- Carmakers BYD and SAIC, iPhone assembler Foxconn and oil company Sinopec are among ‘new faces’ in the industry
Total daily capacity surged to 110 million units at the end of February, according to the National Development and Reform Commission, from 20 million at the start of the month. At this rate, the country is set to churn out almost 10 times the volume it produced in 2019.
“It’s a no-brainer that this will eventually lead to an overcapacity,” said Gao Shen, an independent manufacturing sector analyst based in Shanghai. “The profit margin in this business is extremely thin and demand will drop when the viral outbreak is contained.”
The biggest public health crisis in two decades has enticed 3,000 newcomers to the industry this year, according to Sina news portal, adding to a field of 4,000 who produced 4.2 billion face masks last year or half the world’s output, according to government data.
Among the ‘new’ entrants are a clutch of juggernauts – car makers BYD and SAIC-GM-Wuling, iPhone assembler Foxconn and oil and gas producer Sinopec.
China’s mask-making juggernaut cranks into gear, sparking fears of over-reliance on world’s workshop
BYD chairman and founder Wang Chuanfu led a team of 3,000 engineers working round the clock to build a factory in Shenzhen over the weekend. The nation’s largest electric car maker will install the world’s largest line with a capacity of 5 million masks per day.
SAIC-GM-Wuling, a General Motors joint venture in China, said last month its production capacity in the southwest Guangxi region had reached 1.7 million masks a day.
“China has the opportunity to export its excess output as the coronavirus spreads quickly outside the country,” Gao the independent analyst said. “The question is how long the epidemic will last across the world.”
Hong Kong property heavyweight branches out as it pumps millions into face mask production
Some companies in Hong Kong, such as New World Development and the owner of HKTV Mall, have also stepped into the game, frustrated by the breakdown in supply chain in China after various lockdown measures crippled the logistics sector.
The new production facilities have come on the back of equally rapid increase prices in mainland China and across the region, fuelled by panic buying as fears intensified.
A surgical mask, typically priced at 0.46 yuan (6.6 US cents), reached 5 yuan in prices quoted by resellers on some e-commerce sites in January. For producers, the ‘normal’ margin can be as low as 0.005 yuan.
“The threshold for dealing with face mask production is high as regulators set high requirements on workers’ skills and safety in the manufacturing process,” said Wu Shengrong, chairman of Shanghai Dasheng Mask, which produces 200,000 pieces a day. “It is not advisable for companies with small scale to move into this business.”
