A report by the Times of India (TOI) stated that more than half of the manufacturers (over 100) of surgical and N95 masks have either shut or are planning to shut down shops.
How it started
In March, when the lockdown started and masks, sanitizers were made mandatory as a preventive measure against Covid-19, India witnessed an extreme shortfall of surgical and N95 masks as well as hand sanitizers as everybody rushed to various shops to get their hands on these products.
As a result, to meet the shortfall, many companies and new players across the country started to manufacture masks in order to meet the demand and tap the market. The government had also banned exports of all kinds of masks in March to avoid any shortage in the country along with other medical supplies and PPE Kits.
Slowing demand
After months of ramping up production, the All India Mask Manufacturers Association had urged the government to remove restrictions on the exports of N95 masks as they had surplus capacity lying and were missing out on export business.
One-by-one, the center started to remove curbs on exports of the medical supplies, PPE Kits, and masks. In October, the government removed restrictions on N95 masks, however, the industry believed it was a bit too late. Industry body Association of Indian Medical Device Industry’s (AIMED) forum coordinator was quoted by TOI saying that the Indian market had a glut of overcapacity, falling prices of masks with low-quality standards after which manufacturers have been struggling to sell finished goods or even raw materials inventory.
All India Mask Manufacturers Association president told TOI that established players were able to use their full capacity to produce N95 masks for a brief time, but exports were banned, demand started dropping drastically, and supply kept getting created resulting in extreme oversupply.
The demand for N95 masks was also hit after the health ministry warned against the use of N95 masks with valved respirators, saying that those do not prevent the virus from spreading out and are ‘detrimental’ to the measures adopted for its containment. By then, cloth masks were out in the market and people’s preference shifting to various designed cloth masks as compared to N95 ones.
The report by TOI added that the oversupply of masks may see 50% of companies shut shop as many players who entered the industry are now saddled with huge inventories, and under-utilized plant and machinery. The last few months haven’t witnessed any demand for N95 masks due to which some manufacturing plants are running losses.
Zooming out,
The panic and necessity during the start of the pandemic led to many players get into this market in order to make the most out of the situation. And now looks like they all went beyond the need and ended up being in the problem of plenty.
Head to moneyguru’s Insight section to stay updated on all major financial news updates of the day!
