The coronavirus-related mask manufacturing bubble in the first half of 2020 is rapidly bursting, according to an article attracting 35 million views on Weibo Wednesday. According to interviewed manufacturers, producer prices for the ubiquitous face mask have fallen by up to 90% from a high of 1.6 yuan ($0.22) in March, while export prices have dropped from $0.65 to $0.17-0.20.
What’s the story?
As China and the rest of the world scrambled to buy medical-quality masks, protective equipment and ventilators at the start of 2020, Chinese manufacturers switched production and these sectors swelled with excess capacity. According to an article published by the business news site 21jingji.com, demand for filtration fabric called meltblown material initially rocketed and investment in mask production equipment flooded into the sector. But in a few short months, manufacturers have discovered that demand can also recede.
According to a producer from Hubei interviewed by 21jingji.com, “At the peak in March, masks cost 1.6 yuan each wholesale, and we were making profit of up to 0.5 yuan apiece.” The producer will not quit on the sector, he says, as raw materials have fallen in cost even faster, which means he still makes comfortable profit margins. He believes raw materials are one twentieth their peak price.
One export manager told 21jingji.com his company entered the mask business at its hottest and spent a lot of money on export certification. While export prices have fallen since, orders are stable, and overseas prospects have not yet cooled.
Switching from plastics to filtration material and mask production has been an important lesson in the cost of business transition for a large swathe of manufacturers in the country.
What are people saying online?
Weibo users responded to the topic by noting manufacturers have been making good money by switching to high grade medical masks. “No wonder regular masks are such poor quality now. . . As soon as the last one was finished, the company packed up and transferred out of there.”
Mask buyers in China believe the money was made off their backs, with one user asking, “1.6 yuan? Are you sure? 4 to 5 yuan was the cheapest I could buy a mask for.” Export prices were also the subject of discussion with one commentator in the U.S. writing: “Home Depot is selling masks now for $0.60 each in the most eye-catching spot in the store. I’ve seen companies buy them for their staff, and buy a lot, which means Home Depot must be making plenty of money.”
Many were astounded by the extent of the bubble with the most popular comment on Weibo being, “If only the housing bubble was this dramatic!”
Editor Marcus Ryder (email@example.com)