While the West Hoards Toilet Paper, China Stocks Up on Facial Masks
With the spread of the novel coronavirus, demand for masks in China has exploded. While for many people in the country masks were already part of everyday attire, currently, literally every person across the Middle Kingdom wears one. The daily demand for masks is in the hundreds of millions, and there is a serious supply shortage.
From 2011 to 2018, China’s mask production has maintained a steady growth trend, that slowed around 2014 and then exploded again in 2018. In 2019, China’s mask production exceeded 5 billion units, accounting for about 50% of global production. China is the world’s largest mask producer and exporter.
Since masks are high-use products, the inventory cycle for them is roughly 1-2 weeks, and usually, factories do not have time to create substantial emergency stockpiles. Furthermore, given the fact that the current epidemic broke out during the Chinese New Year, when very few people in China were working, mask companies quickly emptied their inventories.
Currently, due to the lack of workers, most of whom are quarantining at home, suspension of work at companies providing mask manufacturers with raw materials, and disruptions in logistics, China’s mask industry is struggling to expand production to meet public demand. According to a report by the Chinese think tank Forward, China’s supply shortage of masks is not likely to end any time soon.
Nonetheless, most mask manufacturing companies have resumed work and aim to expand production. The output of masks in China is rapidly increasing.
On January 29, 2020, the Ministry of Industry and Information Technology announced that the output of masks in China reached more than 8 million a day and that factories had rehabilitated their capacities by 40%. Based on this calculation, China’s actual mask production capacity is approximately 20 million per day.
Many factories across China are working around the clock to make up for the surging demand. According to Forward, at present, the daily output of masks in China has exceeded 15 million, which is close to 75% of China’s maximum production capacity, with more than 200 mask companies involved in the process.
The increase in production is most visible in Mainland China’s supermarkets. A month ago, buying a mask in a store or even online was virtually impossible. Currently, several supermarkets have stocked up on masks usually selling no more than two packs to one customer to avoid panic buying and ensuing shortages. Convenience stores like 7-11 have even started importing masks from overseas, selling Spanish and Japanese brands at a noticeably higher price compared to locally produced ones.
A few entrepreneurial Chinese have gone as far as to invest money in mask factories. However, it is still unclear if they will be able to make a return on their investments. As more people start pouring funds into mask factories, the whole industry might go down as a borderline Ponzi scheme with factories hoarding massive investments but unable to pay sufficient dividends.
Yet, the appeal of the investment is obvious. Over just two days on Jan. 20 and 21, 80 million masks were sold on Taobao. Between Dec. 30 and Jan. 24, American conglomerate 3M, producing hugely popular face masks in China, added $1.4 billion in market value. Another American mask-making conglomerate, Honeywell, added $500 million in market value. The total output value for China’s mask market in 2020 is estimated at around 13.1 billion yuan. If accurate, this forecast would mean that it will grow 28% year-on-year, more than twice the growth of previous years. And considering the fact that the pandemic is spreading like wildfire, Chinese mask-makers could see huge revenue growth.