Market for Chinese-made masks is a madhouse, says broker

The scramble for face masks has created a “madhouse” atmosphere among Chinese manufacturers, who are making huge profits as customers around the world fight to be the first in line.

Producers of masks and respirators are demanding to be paid in full before the products leave their factories and are supplying whoever can pay the most and pay fastest, according to Michael Crotty, a textile broker based in Shanghai.

Crotty, of Golden Pacific Fashion and Design, said he had spent all of Sunday dealing with a flood of new enquiries from US states, national governments, cities, hospitals, distributors and private companies seeking to protect their employees.

“It’s just a madhouse,” he said. “Money talks. The factory knows one thing: what’s in my bank account and when did it get there? And if it gets there before the other guy then that’s who is going to get the production time.”

Factories that have quickly changed their production lines to make masks are demanding 50% payment when an order is made and the other 50% before the masks leave the factory. With scams proliferating, those are often unacceptable terms to many buyers, especially those spending taxpayers’ money.

“The factory doesn’t care,” Crotty said. “They’re getting orders from people they’ve never heard of before. It’s a really unusual circumstance to have these factories absolutely in the driver’s seat. And they’re in the driving seat not of a Volkswagen but of a Mercedes limousine.”

Wearing masks has long been common in parts of Asia to combat air pollution and the spread of disease, but until now was rare in Europe and the US.

The masks on the market range from thin cotton coverings to fine-mesh surgical masks and respirators that form a seal over the mouth and nose and have to conform to strict specifications.

Some European countries are weighing up whether to advise the public to wear masks when not at home. Last week the CDC in the US issued guidance recommending wearing a mask in public spaces. Trump has shrugged off the advice so far, saying: “This is voluntary. I don’t think I’m going to be doing it.”

French and German officials blamed the US last week for using “wild west” tactics to outbid them, but Crotty said the outbidding appeared to be an all-against-all affair.

Over the weekend authorities in Berlin withdrew a claim that the US had “seized” a shipment of 200,000 respirator masks ordered for the city’s police force, a claim that led to an accusation of “modern piracy” from Berlin’s state interior minister, Andreas Geisel.

According to Der Tagesspiegel newspaper, the police now say they were outbid while the respirators were in transit at Bangkok airport. The Berlin authorities say it is unclear where they went and who the ultimate buyer was.

Der Tagesspiegel reported that the masks were made by the US manufacturer 3M, but it has denied any involvement in the transaction.

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The company has come under intense public pressure from Trump in recent days for continuing to supply masks to other countries. On Thursday he invoked the Federal Production Act, which dates back to the Korean war era and has given the administration the right to use “any and all authority” to procure the protective equipment it needs.

“We need the masks. We don’t want other people getting it,” Trump said in a Saturday briefing to reporters. “That’s why we’re instituting [the] defence production act. You could call it retaliation because that’s what it is: it’s a retaliation. If people don’t give us what we need for our people, we’re going to be very tough.”

3M issued a statement on Friday saying that cutting off supplies of protective equipment to Canada and Latin America could cause a humanitarian crisis, but Trump stepped up his attacks on the company over the weekend.

“The people that have dealt with them, have dealt successfully with many companies over the last month, And they don’t like the way 3M has treated our country. They don’t frankly like the representatives of 3M,” he said.

Last week the US authorised the importation of respirator masks from China made to a Chinese standard that is close to US specifications for the N95, which filters at least 95% of particles that are 0.3 microns or larger. (The European equivalent is the FFP2 respirator.)

At the same time, stung by widespread reports of shoddy masks imported from China, Beijing took action to regulate producers. However, Crotty said the effect of the regulation has been to cut off supply. Beijing is only giving certification to companies that have previously sold on the Chinese domestic market, but Crotty said four-fifth of the factories he dealt with manufacture solely for the export market.

“Only 20% might have these certificates, so of course they’re going to raise prices higher,” he said. But he added that masks without certification could still be exported if they were labelled for personal or commercial use only.

Crotty said everyone involved in the market was trying to improvise in unique circumstances. “None of us have ever seen anything like this. The reaction to the pandemic in the US was not very well prepared. So I think hopefully there’ll be big lessons learned through all of this, when this tapers off.”