Chinese makers of medical suits are experiencing a surge in export orders as domestic demand falls, but overseas shipments face mounting obstacles - the lengthy process of obtaining quality certifications, the overburdened international logistics sector, and market chaos, where the upstream stockpiles of a key medical material have led to price volatility overseas.
Between March 1 and April 4, more than 37.5 million medical suits had been exported, with a total value of 10.2 billion yuan ($1.44 billion), according to the General Administration of Customs of China.
With the rise in exports, regulations on the quality of overseas shipments have been tightened. Previously, manufacturers had to obtain the CE marking from the EU and the certification of the US Food and Drug Administration (FDA) to be able to export to the EU and the US.
From the beginning of April, however, all medical products also had to obtain a domestic quality certificate from Chinese authorities before being exported.
While the multiple certificates are intended to ensure the quality and safety of the products, the lengthy application process also means a prolonged shipping time for these much-needed products.
According to Wang Xuguang, general manager of BW Tech Textile in Beijing, the company has received numerous inquiries from international clients — governments as well as trading companies — since late March. Many inquiries involved more than 1 million medical suits each, but Wang's factory has been hesitant to take these orders given the long and costly process of attaining the CE, FDA and Chinese certificates.
Wu Kangping, head of Zhejiang Longtai Medical Technology Co, is also concerned that the difficult process of getting certified means a lot more uncertainty for his export business.
According to Wu, the average time to attain the CE and FDA markings for his products is about two weeks, but the fees charged by third-party agencies to help conduct the process have increased significantly. The domestic certificate required since April 1 has prolonged shipments.
"Once we have the CE and FDA markings, our clients can usually expect the products to arrive in around a week," Wu told the Global Times, adding that "now with the new domestic certificate, a lot of our products can be stranded in China's customs for up to another two weeks."
"It's an uncertainty we can hardly afford," Wu said. "Our top capacity is only around a few thousand units per day, so we must make sure that every order is delivered in time, so we won't lose any money."
Increasing logistics costs
For export orders to be shipped and received in time, businesses are also facing tremendous difficulty as air cargo flights are being cut despite the growing demand from the market.
Wu said that there is "an extreme shortage of cargo flights to Europe," and many airlines either don't have enough flights or don't have enough cargo space to carry all the products.
Since the start of the COVID-19 pandemic, many international airlines have shifted their usual passengers business to cargo flights, and according to the Civil Aviation Administration of China, flights have almost resumed to the level before the pandemic, but that is yet to meet the surging demand.
"There was an order of 100,000 medical suits from Italy that was long overdue, and it was all scattered and stalled at four different transfer points across Europe because the airline couldn't find enough space in one flight to fit them all in," Wu said.
Li Zhiming, president of the Nanjing-based Jiangsu Casdilly Dress Co, told the Global Times that due to exploding demand, the cargo rates have been increasing, weighing heavily on the company's exports.
"Cargo rates on Europe-bound flights, including to the UK, Italy and Spain, can change drastically on a daily basis, and sometimes the rates can be double the levels before the coronavirus outbreak," according to Li.
"We are definitely hoping that more flights will be resumed overall so that the cost can drop," Li said. "But for now, we as well as our clients are struggling with the rising costs and delayed shipping."
Aside from rocketing logistics costs and the issues involved in obtaining multiple quality certificates, Chinese manufacturers are also at increasing risk of market chaos, as surging demand for medical suits from overseas has hit the industry with the presence of unqualified factories and speculators who are trying to muscle into the lucrative business by hoarding materials at the upstream.
According to Li and Wu, speculators have been wreaking havoc with the market since the end of March, when a key production material, the high efficiency melt-blown electret nonwoven material that is supposed to filter out most viruses, suddenly ran out nationwide, and the price of the material has doubled since.
"The price of the material has increased from 3 or 4 yuan per meter to around 8 yuan per meter, and it is very hard to acquire in large quantities," Wu said.
Li confirmed that businesses throughout the industry are facing the same problem, and "there is no doubt that somebody is stocking up the material and trying to rip off some money."
The domestic market for medical suits was strictly regulated by the government when the outbreak was at its peak in Wuhan, Central China's Hubei Province, and all selling and buying activity was handled by government authorities, Wu said, but for now, regulations are temporarily lacking for exports.
In the absence of strong regulation on pricing, some factories that had never had the experience of producing medical protection suits have entered the market with products that are inadequate in quality but cheap in price, posing potentially destructive competition to other manufacturers.
The price of products sold to domestic clients was monitored by the government, within a range of 100 yuan to 150 yuan, according to Wu, but now some of the small factories offer a price as low as 80 yuan.
"As international demand rises, of course a lot people want to enter the business and make some money," Wu said. "But as the government puts stricter controls on the market, I think only the ones with strong competitiveness in quality as well as price will eventually stand out."
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