For Mask Manufacturers in China, the Opportunity May be a Crisis

Masks, an object that won’t be cared about by everyone at ordinary times and an unknown industry, have become a new choice for mass venture capital. There are numerous legends about making a fortune by making masks: a small mask factory that is going to close down is now earning tens of millions a month by virtue of orders. A “profiteer” who squatted in a mask factory earned millions depending on the supply of goods.

Huge benefits have driven countless profit-seekers to go forward. At present, 99,786 enterprises in China are involved in masks and 38,847 are registered within one year. At present, there are 4,689 mask manufacturers in China.

With so many mask manufacturers in China producing masks, what is the production capacity of masks in China?

Currently, a semi-automatic film maker can produce 40-50 masks per minute. At present, there are 4,689 mask manufacturers in China. Based on the fact that each has 2 production lines, machines are manufactured 12 hours a day and 40 masks are produced per minute, the daily production capacity in China has reached 270 million. This is not counting masks produced by unregistered family workshops. With so many masks, why are masks still so expensive? Although the current price of masks has dropped somewhat. But judging from Taobao, disposable medical masks are priced at RMB 2 yuan per piece and KN95 masks are between 12 yuan and 20 yuan. There is still a gap of several times from the price before the epidemic.

Masks are so expensive, who makes the money?

This needs to be started from the source. As far as mask production is concerned, the threshold is not high: a sterile workshop, a machine, purchasing raw materials and applying for a license,then can be started soon. It is precisely because the threshold is not high that mask manufacturers are flocking to China.

In terms of implementation, the reality is very cruel. The first problem facing us is the purchase of mask machines. Affected by the relationship between supply and demand, a mask machine with an average price of more than 100,000 yuan has now risen to more than one million yuan. Even if the order is taken, it does not mean that the machine can be received in a short period of time. As a result, the futures market has now emerged. For every day of delay, the change is several times more. It is common to sit on the floor and get prices. The machines are also various and the goods are not correct. Due to the difficulty of machine debugging, the market has also spawned many teams specialized in selling debugging services, and even reported a service price of 100,000 yuan a day on the network.

With machines, raw materials are also needed. The raw materials of the mask are not complicated. Non-woven fabrics and meltblown fabrics constitute the whole. The problem is that meltblown cloth is a kind of partial door material in chemical industry due to long production and construction period, high technical threshold and high cost, and the demand itself is not particularly strong. The sudden arrival of the epidemic has made meltblown cloth a darling.

The author learned from those mask manufacturers in China that the price of meltblown cloth before the epidemic was 20,000 yuan per ton. The price then rose to 300,000 in February. Before the press release, the price of 95-99 meltblown cloth ranged from RMB450,000 to 600,000 per ton. Non-woven fabrics cost 90,000 to 115,000 yuan per ton. It is conservatively estimated that meltblown cloth is 0.45 yuan /g and non-woven cloth is 0.09 yuan/g.

According to the calculation that two layers of non-woven fabrics and one layer of meltblown cloth are used to make disposable medical masks, one mask uses 1g of meltblown cloth and 2g of non-woven fabrics. The price of core raw materials has reached 0.63 yuan. In addition, the nose bridge clip, ear cord, packing bag, labor, etc. will be included in the mask. Then the cost of a mask is basically more than that of 1 yuan. Similarly, it can be calculated that a KN95 mask is above 4 yuan. However, this price is only the price when the quality of raw materials and the purchase price are lower.

The cost is already high, but this is only in an ideal situation. In fact, to sell masks, your mask manufacturers in China need formal procedures and records. Most importantly, you can get reliable raw materials.

First, let’s talk about raw materials. According to official data, the daily supply of mask manufacturers in China has reached 42.5 tons. Combined with the supply of regular private mask manufacturers in China, the total amount of meltblown cloth will not exceed 100 tons. This is a data showed that the current production capacity of masks in China has reached 270 million.

The shortage of meltblown cloth under the epidemic situation has stimulated the development of the industry. Take Yangzhong City, Jiangsu Province, the “hometown of meltblown cloth”, as an example，since the outbreak of the new crown epidemic situation, Yangzhong City has registered more than 800 meltblown nonwoven enterprises involved in production and sales. Since the raw materials can’t be handled, substitute products will be used. Ordinary polypropylene fiber material is used to replace melt-blown fiber material, and a small melt-blown machine with a cost of 300,000 yuan is used to replace professional melt-blown cloth equipment with a cost of nearly 10 million yuan. In the end , the production is without meltblown fabric electret processing, or filtration efficiency of meltblown fabric has only about 40%.

However, such meltblown cloth has been used by “profiteers” and has become the “import source” in the mouth , sell on the market.

So, you think the raw materials you received:

The raw materials you actually received:

Let’s talk about qualifications. Most bosses are affiliated with other people’s companies. The site cost is 5,000 yuan per day. Some still need to pay a deposit of 5,000 to 10,000 yuan per day. This is another cost. At the same time, qualification determines the sales channel. At present, with the improvement of the epidemic situation in China and the increase in the cost of masks, masks can already be purchased through regular channels and the price cannot be increased. What about masks produced? Turn to the export.

So far, China mask export is mainly in two ways, one is self-delivery, the foreign military planes or charter flights are sent to carry out transportation; the other is domestic air transportation. Air freight transport capacity is mainly composed of two parts: the belly cabin of the passenger plane and the full cargo plane, of which the belly cabin mainly carries cargo. Data from civil aviation university of china Airport Economic Research Center show that in 2019, the proportion of abdominal cargo in China’s international routes is 48.6%, and the proportion of all cargo aircraft is 51.4%, which are basically the same.

Affected by the epidemic, some air routes have been cancelled, so the freight is rising. Take shipping to Europe as an example，although the fastest flight can be guaranteed to leave on the same day, it can be delivered within 3-4 days with double clearing, tax filing and door-to-door service, but the price is reaching 160 yuan /KG. The price of ordinary air transportation which basically takes 8-15 days to complete the delivery,also ranges from 58 yuan /KG (excluding customs clearance)-70/kg (including customs clearance). Basically, the freight equivalent to each mask is about 7 cents.

In fact, this is a good business, each mask plus 7 cents of freight to overseas, changed hands can sell a few dollars or even more than a dozen dollars. However, it is the distributors who make the money, and it is very difficult for mask factories to make profits . Besides, the number of mask manufacturers in China that can be exported is limited. At present, there are more than 60 FDA-certified masks in China, and a large number of masks are still circulating in China. Therefore, the biggest profit in the mask industry, in the upstream, the suppliers of machines and the suppliers of raw materials, face a serious imbalance between supply and demand. As long as there are goods, there is no problem that they cannot be sold. They have made huge profits. The author actually learned that the full set of production machines and moulds cost about 150,000 yuan, the raw material polypropylene is about 13,000 yuan/ton, and two tons of polypropylene can produce one ton of meltblown cloth. Take Yangzhong businessmen as an example. They invested 300,000 yuan to build a melt-blown cloth production line. When the cost was recovered, they made 20 million yuan in two months of production and sold the production line at a high price.

Secondly,the middle man or the “speculator”, without any products but countless increases price, have raised the price of masks. They contact the upstream and downstream, communicate with each other side, stay indoors and make money easily. But the actual mask manufacturers in China, large-scale formal enterprises no need this. It is the players who enter the game in the later period who are really facing difficulties. The machine was purchased at a high price, and qualified raw materials could not be purchased, thus it was faced with idling. The so-called “substitutes” that can be purchased are affected by the increasingly strict supervision of the National Government and the return of masks from some countries, it is more and more difficult to sell.

Where Will Mask Manufacturers in China Go？

Recently, Yangzhong City, Jiangsu Province, the “hometown of meltblown cloth”, announced that all meltblown cloth business enterprises had stopped production for rectification and that the Ministry of Public Security had begun a major inspection campaign for meltblown cloth throughout the country. At the same time, the former State Supervision Committee of the Central Commission for Discipline Inspection said that the General Administration of Market Supervision had announced that as of now 88.626 million masks had been seized for illegal manufacture and sale.

At present, a businessman in Yangzhong said that he invested hundreds of thousands of yuan to buy back the machine. At present, because of control, no one buys the cloth produced, and his own workshop will also face the danger of being seized at any time due to problems such as qualification. Another mask manufacturers in China said that due to the severe shortage of masks in the early days, masks can basically be sold at high prices. With the increasingly stringent testing at China and abroad, masks that do not meet the quality standards are difficult to enter the field of medical masks, while civilian masks are extremely low in price and are affected by raw materials, thus making them basically unprofitable. A vicious circle has long been formed within the mask industry. Funds are urgently needed to be returned, poor quality materials are purchased for production, the products are delivered to the next player at a low price,the next people play tricks on selling.

Everyone knows that mask profiteering is not sustainable and that the policy may be tightened. They just want to win time, win the market and win the policy under profiteering. They also want to fast-forward and fast-out. They won’t become a scapegoat and earn their first bucket of gold. However, as far as the mask industry is concerned, what is certain is that with the increasingly strict control, the bubble will eventually burst and those who are desperate under the trend of huge profits will eventually face a crisis.

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