One month ago — an eon in COVID-time — medical mask manufacturer Armbrust American laid off more than 100 workers and started shutting down a cutting-edge production line that at its peak was churning out up to a million masks per day for U.S. consumers and hospitals.
The Austin, Texas-based company was one of hundreds of small to mid-sized manufacturers that stepped up early in the coronavirus pandemic to address shortages of urgently needed medical supplies such as gloves, gowns, face shields, and FDA-approved N95 masks.
The ramp-up took time, however, and many companies found themselves hitting their stride just as the vaccine roll-out and the end of mask mandates softened demand.
"The government told us we need your help as private citizens," said CEO Lloyd Armbrust. "We didn't get any grants, or anything like that. We just did it. Then as soon as we got up to that capacity, there was no demand. It absolutely went away."
Armbrust wasn't alone in feeling the shift. The American Mask Manufacturers Association reported in late June that its members had laid off nearly 5,000 employees, and multiple companies had either shut down entirely or discontinued their domestic production.
Armbrust held on longer than some, relying on the consumer market to stay afloat, but falling demand ultimately forced the company to shrink down to a skeleton crew, which was only supposed to stay on until the factory finished out its $55,000 per month lease.
Fortunately for the company and unfortunately for the world, the delta variant had other plans. With cases rising across the U.S. and state and local governments reinstating mask requirements, the market for personal protective equipment (PPE) is again surging.
The question facing mask-makers now is whether they can keep up with the combined demand of consumers, hospital systems, and now schools, many of which are reopening in September with mask mandates for their students. "I have one kid's mask line that I'm running 24/7," Armbrust said. "I don't think there's really any kid's masks available in the United States right now."
He said the company is already getting calls from Texas schools begging for a line on masks.
The difficulty of relaunching their production lines has left manufacturers such as Armbrust lamenting that they weren't better prepared — a situation they blame in large part on the federal government for not stepping up to help keep the industry running during the lull in demand.
"It's clear the United States does not want there to be domestic manufacturing of masks," he said. "We were told they did. We responded, but it didn't work out."
Cheap Imports Rise Again
After months of super-cheap masks being available online and in stores, a return to the bad-old days of spring 2020 might be hard to imagine, but suppliers say prices are already surging.
Michael Sinensky, CEO of WeShield, a New York-based manufacturer and distributor of face masks and other PPE, said the wholesale price for a standard 3-ply disposable face mask has risen 500 percent over the past three weeks from under a penny to five cents a mask.
Consumers are just beginning to feel this price increase, but Sinensky anticipates more severe supply shortages in the near-term, as inventories and stockpiles are drawn down.
"It started in the beginning of August, and it's going to be really felt in September and October, right when school starts again," he said.
The current pricing, he added, also doesn't account for the additional shipping costs that are all but inevitable as China and other countries partially shut down due to rising delta cases.
In many ways, the situation is strikingly similar to where the country was at the beginning of the pandemic, explained Ethan Karp, CEO of MAGNET, a manufacturing extension partnership or MEP that worked closely with Ohio-based manufacturers in 2020 to bolster mask supply.
Over the last year, he said, U.S. buyers once again became dependent on the cheap imports of foriegn producers, which piled back into the domestic market as shortages abated. "They were selling them at rock-bottom prices to the point of dumping to get them back into the supply chains that they had totally disrupted and left hanging in the wind for so many months."
Imports are a two-way street, of course, and the biggest buyers (i.e. hospitals) were ultimately more concerned with cost-efficiency than helping bring home sensitive supply chains.
"When you're looking at hospital systems, our experience has been that price sensitivity within a couple percentage points wins the day every time," Karp added.
However, the medical mask market was always extremely price sensitive. That is why the high prices that came with shortages helped U.S. manufacturing, which generally has higher labor costs, to reclaim some territory from foreign producers.
"The market a year ago was a very different place because PPE supplies were extremely hard to find and prices escalated dramatically, which really opened the door to a lot of manufacturers pivoting their production lines," said Rob Ivester, deputy director of the Hollings Manufacturing Extension Partnership program at the National Institute of Standards and Technology (NIST).
He said early in the pandemic many companies tapped into their operational capital to do their part in the fight against the virus. They were also trying to keep their employees on payroll as soon as possible. In other words, cost wasn't their biggest concern, at least for a short period.
Now the emphasis has shifted back to price, and the market can be unforgiving.
"When a mask costs 10 cents pre-pandemic, but it costs $3 during the pandemic, that opens a lot of market space for manufacturers that can't be competitive on a 10-cent mask, but they can be on a $1, $2, or $3 mask," he said.
The investor's answer to this problem is that American manufacturers need to focus on developing new technologies and industrial processes — specifically those that reduce "touch labor" and thus bring down labor overhead — to justify their extra cost, because in his view, there's no escaping the reality of global competition.
He pointed to companies such as ReadiMask, a New York-based manufacturer that produces strapless N95s at a premium, allowing them to compete at the higher end of the market rather than with rock-bottom imports.
"The foreign producers are always going to be there," he said. "We need to realize that we live in a global world from a market and product standpoint, and much of that global competition is really going to be focused on low price points."
Buyer of Last Resort
The idea that cheap foreign imports are an inevitability doesn't sit well with some manufacturers, who feel that the government should play a bigger role in helping on-shore supply chains that are crucial to national security and public health.
In particular, they argue that the government should have stepped in as a buyer of last resort to keep domestic production running smoothly — at least as long as a potential resurgence in COVID cases was a possibility.
"The government should have been stockpiling," Sinensky said. "They should have been hiring United States manufacturers, not just companies like 3M that make masks for hospitals, but also for civilians. If they're going to do mandates, they should be giving people supply."
As of May, the Strategic National Stockpile was better stocked than prior to the pandemic and had nearly half a million N95 respirators in reserve. Where it stands now isn't exactly clear, though numerous sources in the industry suggested it was dwindling rapidly.
But government-buying impacts more than just the stockpile. It's also a matter of industrial policy. Karp, who does not think shortages are imminent given the build-up of capacity over the past year or so, still thinks the government missed a chance to expand an important manufacturing sector at home.
"I think it's a missed opportunity to build up a stronger supply chain of those materials here, but the only way that was going to happen is with long-term commitments made a few months ago before everything went back to normal with overseas shipments," he said.
The Biden administration has taken tentative steps to shift government procurement to domestically produced goods, but Karp said the industry has yet to feel the impact.
An executive order signed in July aims to cut down on waivers to the Buy American Act, which first passed in 1933 and sets a threshold for the percentage of government procurement that needs to come from within the U.S. economy.
President Joe Biden also appointed Celeste Drake, formerly of the AFL-CIO, to serve as the first "Director of Made in America" at the Office of Management and Budget to help "shape and implement Federal procurement and financial management policy to help carry out the President’s vision of a future made in all of America by all of America’s workers…"
How these policies affect mask-makers remains to be seen. This isn't the first presidential administration to promise a return to U.S.-based manufacturing. President Donald Trump's America First rhetoric did little to shift the balance of trade, let alone prepare the country for a pandemic.
By the federal government's own measure, there is still work left to be done. The Government Accountability Office issued a recommendation in January for the Department of Health and Human Services to develop a supply chain strategy for pandemic preparedness. As of May 2021, the agency had yet to do so.
Armbrust, for his part, is unambiguously skeptical about the administration's efforts so far.
"The Biden administration hasn't done s--- but talk," he said.
Breathing Easier
In the meantime, for regular Americans worried about running down their personal supply, there is at least some evidence that the current mix of domestic and international suppliers might hold up to the spike in demand.
Project N95, a nonprofit marketplace for PPE that aims to ensure trust and consistency in the products, said that its prices have remained steady.
"We've seen a really big increase in supply, which means that even with this surge around delta, we haven't seen in our marketplace an increase in pricing," said Anne Miller, director of Project N95 and a consultant for the medical device industry.
She noted that shipping costs from China are up, but this has only made domestic producers more competitive.
"We'll probably see some tightening of supply," she said. "I don't think there's going to be a shortage."
Mask-makers such as Sinensky and Armbrust, meanwhile, said shortages are almost certain, even as they ramp up their own production.
As Ivester of NIST highlighted, the needs of the market and America's industrial might can sometimes diverge.
"It's not about production capacity. The real constraint is the business market. Can they be profitable?" he said. "There's no lack of production capabilities in the United States."
