Coronavirus: wheels come off China’s mask-making gravy train, as low-end manufacturers count their losses
- Tens of thousands of opportunist manufacturers entered China’s mask-making industry to capitalise of the boom during the coronavirus pandemic
- But the gravy train has ground to a halt for some producers of meltblown and nonwoven fabric, who have been forced to shut their factories
In April, as China’s mask-making juggernaut was cranking up, Changzhou machinery part manufacturer Mo Xiaoyi stockpiled meltblown fabric and nonwoven fabric, both essential mask materials, at peak prices.
Sixty kilometres away in Yangzhong, a small island in Jiangsu province, furniture maker Mr Li invested more than 2 million yuan (US$282,685) in six meltblown production lines, but could not manufacture a single inch of fabric before local authorities closed his factory down.
Both men have been left with materials and equipment that are virtually worthless, falling well short of the windfall they had expected when clambering aboard China’s face mask gravy train, only to find that the wheels were already coming off.
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“A few months ago, everybody here was making meltblown and thrilled at the daily influx of cash. Now, the people walking in the street are miserable,” said Li, who declined to give his full name.
The promise of huge profits lured tens of thousands of “tide players” – a widely-used Chinese terms for enterprising individuals who are always first to every new scene – who had no knowledge or experience of the “chaotic” industry.
In the first five months of the year, 70,802 new companies registered to make or trade face masks in China, a 1,256 per cent rise from a year earlier.
At the beginning of the outbreak, people would buy whatever masks were available, but as the situation improved and fewer people are wearing masks now, people have more choice, these unqualified manufacturers are of course being knocked out
But the frenzy started to cool a little in May, with the number of new registrations for masks and meltblown dropping by 70.84 per cent and 57.6 per cent respectively from April’s peak.
Huang Wensheng is the general manger of Shandong Jofo Nonwoven, and has been making meltblown and nonwoven fabrics in his eastern Chinese factory for more than a decade.
Huang said about half of the mask factories in his area have closed down, mainly those that sprang up after the virus was brought under control in China, but which he said delivered low quality products.
He blamed falling overseas demand for inferior masks for the closures, but also Beijing’s crackdown on the export of non-licensed supplies amid staunch criticism from governments around the world. Huang added that for established manufacturers, business is still “quite good”.
“At the beginning of the outbreak, people would buy whatever masks were available, but as the situation improved and fewer people are wearing masks now, people have more choice, these unqualified manufacturers are of course being knocked out [of the market],” Huang said.
In Changzhou, Mo Xiaoyi spent three weeks preparing to manufacture, before selling the first batch of uncertified masks on April 10, priced at 6.5 yuan (US$0.92) each. It was not a complicated process, he said.
It was also easy to find buyers back then, Mo said. Traders parked their trucks at the gate of his factory, a textiles hub in China’s industrial Jiangsu province, and paid cash for all the masks he could make, without asking for certificates or licences.
But things took a drastic turn overnight.
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Facing huge losses, Mo still says he is one of “the lucky ones”, because he paid 117,000 per tonne on average for his stockpile of nonwoven fabric, while many of his friends paid 150,000 yuan.
“I bought two tonnes of nonwoven fabric in early April, at 99,000 per tonne, but everybody was snapping up the material as supply was far behind demand, so I followed suit and bought more when the price went to up 130,000 yuan per tonne,” Mo said.
At the height of China’s mask-making mania, the little-known city of Yangzhong became known as “the home of meltblown”, with almost 1,000 new firms registering to make or trade the fabric in the city of just 340,000, as of April 10, according to local government statistics.
But now, hundreds of meltblown mills have closed, with the local sector’s exodus – from component sellers, to raw material providers, to even the technicians who helped to debug the machines – just as dramatic as the mad rush to enter earlier in the year.
Mr Wang, a cookware maker in the city who preferred to only give his family name, was tempted onto the meltblown bandwagon by friends promising massive profits back in March.
After investing in seven production lines, he sold fabric to small mask factories in Anhui, Fujian and Henan provinces, despite not having experience nor licence – but the product they produced was of variable quality.
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For the best quality output, they could charge up to 400,000 yuan per tonne, but for the lower-end offcuts, just 1,000 yuan. At peak times, other higher-end producers were getting 700,000 yuan per tonne.
On April 15, the Yangzhong government cracked down on the chaotic meltblown market, banning 867 companies from producing the fabric. Wang was able to sell his production lines the next day, but not everyone could make a timely exit.
“My furniture factory could not operate during the pandemic, I had to find other ways to make money,” said furniture maker Li, who was one of those unlicensed manufacturers to get shutdown before making any fabric on his 2 million yuan production line investment.
He looked into selling up, but found that the machinery was only worth a few thousand yuan.
“I got a bank loan for the investment, but some of my friends even mortgaged their homes to get loans, at least I am not as miserable as them,” Li said.
Mo, the Changzhou manufacturer is also stuck with his machinery and said that for now, he will go back to making machinery parts. But both manufacturers were hoping they may eventually get a return on their investment.
“I am waiting and seeing,” said Mo. “Maybe there will be a second wave of coronavirus in the winter.”
