Face masks: How material costs can impact your bottom line
Analysis reveals how price volatility in mask components like meltblown can affect production costs
The Covid-19 pandemic caused medical personnel to use far more facemasks than they normally would and introduced the general public to possibly their first facemask ever. The industry initially struggled to meet the exploding demand.
The existing supply of mask components and mask assembly capacity were scaled to much lower levels than required to meet the needs of the pandemic. Industry challenges included acquiring enough machinery, finding trained workers, parts and fabric, and tackling a difficult learning curve – all virtually overnight.
A study commissioned by Fastmarkets Nonwovens Markets, lead by Dr. Liudmila Ilyukhina Ph.D. MatE, CEO and co-founder of Naukatek AS, shows that meltblown material is a significant cost factor in facemask production. But it is not the only cost consideration. Understanding further key factors such as other facemask materials, labor and building rental can help lessen the impact on margins caused by volatile meltblown prices.
Dr. Ilyukhina has created four cost models and a more in-depth interview to better explore how mask producers can improve their cost margins - Access here.
The following article explains:
- Why the pandemic drove up meltblown demand
- How meltblown capacity is growing and why prices are volatile
- What to consider in your raw material costs
- Why worker skill and efficiency matters
1. Why the pandemic drove up meltblown demand
Among the critical materials that were most challenging for industry to source were meltblown nonwovens. The price of meltblown fabrics bounced all over the place as demand skyrocketed; and establishing a supply chain to source enough high-quality fabric took many companies the better part of a year.
Facemask manufacturing costs are highly sensitive to changes in the price of meltblown nonwovens. Facemask producers have been buffeted over the course of the pandemic by wild swings in the cost of this material.
Dr. Ilyukhina’s analysis shows that the choice of an appropriate line, as well as proper operation of that line, had a major impact on profitability – in many ways a bigger impact than any raw material cost volatility.
The price of meltblown nonwoven fabrics, which were in scarce supply in the first months of the pandemic, varied much more widely than other cost components such as spunbond nonwovens, ear loops and nose bridges. The main reason is that while spunbond production is vast compared to the facemask market, meltblown is a relatively tiny industry sector – and was forced to grow by a huge amount very rapidly.
A steep learning curve slowed down the speed new capacity additions
Meltblown supply was also relatively slow to respond to higher demand because existing lines needed so many changes. Changes included the addition of electrostatic charging, swapping out die cassettes for new ones, and adding new dosing units. It was often simpler to buy a whole new machine, even with the very long lead times for such purchases.
Companies that upgraded existing lines struggled to achieve proper quality, while new producers discovered that the learning curve could be quite steep.
2. How meltblown capacity is growing and why prices are volatile
Prior to the pandemic, a buyer of meltblown for facemask manufacturing in Europe might have expected to pay 10 euros per kilogram for the fabric. The typical price quickly jumped to 40 euros in the first quarter of 2020. By the second quarter of 2020, meltblown was largely unavailable. If a mask maker could find a supply, perhaps by purchasing somebody else’s inventory, they could expect to pay 100 euros per kilogram.
Cost increases of this magnitude are extremely unusual in the nonwovens market.
By the end of 2020, as significant amounts of new meltblown capacity were added in Europe and elsewhere, prices had dropped back to around 18 euros. By third quarter of 2021, price were estimated at 11-13 euros.
By contrast, the cost of items like ear loops and nose wires – which can also be used for many other products – has been much less variable over time.
Even in the case of spunbond, which by one estimate was 70% more expensive in Europe for spot tonnage in late 2021 than it was a year ago, the big driver is the run-up in raw material costs, not the scarcity of spunbond production capacity or the rise in mask demand. And a peak-to-trough jump in costs of 70% is a lot less than the 1000% increase seen in reported European meltblown pricing – or even the dramatic 425% increase in pricing shown by an estimate of US meltblown costs.
3. What to consider in your raw material costs
To better understand the impact of materials costs, Dr. Ilyukhina has created four cost models, including two for three-ply masks and two for FFP2/N95-type respirators. For each category of face covering, one model broke down the manufacturing costs for a basic machine, and another model showed costs for an advanced, high-speed machine. Her analysis uses European examples and operating experience, but the overall conclusions would be similar for a North American operation.
Five materials cost components were identified separately in each model, including the outer layer, the filter layer, the face layer or topsheet, nose wire and ear loops.
In addition to materials costs, the models include calculations for electricity, packaging, house rent, and other costs associated with machine operation including protective clothing, ear plugs and cleaning consumables.
The models also allow a user to change assumptions such as staffing and labor cost, machine capacity and throughput, and scrap rate.
Impact of different materials
Not only did the price of meltblown increase by a lot more in 2020 than spunbond, but a big jump in spunbond has less impact on facemask costs than a similar increase in meltblown would. During the third quarter of 2021, meltblown represented anywhere from 45% of the total materials cost of a mask in the case of the three-ply masks to 72% for the respirators – with spunbond, nose wires and ear loops representing the balance, in each case.
In the third quarter of 2021, meltblown made up 42%-72% of face mask material costs.
Using a price of 13 euros per kg for meltblown and three euros for spunbond, and given the study’s other cost and productivity assumptions, an FFP2/N95-style respirator would cost about seven and a half euro cents to produce on a modern high-speed mask line, or 16 cents on a bare-bones line with fewer automated systems and lower throughput values.
Meltblown vs. spunbound cost scenario
By contrast, with meltblown slightly more than tripling to 40 euro cents a kilo, the cost on the advanced mask line doubles, to 15 cents per mask – assuming other cost components are held steady. On the basic mask machine, the unit cost would shoot up to 24 euro cents a mask.
Turning to spunbond, if meltblown cost is left at the baseline level while spunbond is subject to a tripling in cost – from a base assumption of three euro cents/kg to nine cents – it pushes the unit cost on the high-speed line up to nine cents per mask, while in this scenario the unit cost on the bare-bones machine rises to just under 18 cents.
Impact of materials costs depends on machine technology
Materials costs represent a much larger percentage of total per-mask cost for masks produced on the advanced lines than on the bare-bones machines. The sophisticated high-speed technology modeled in this study uses much more automation to reduce labor costs. For the basic mask lines in this study, using the base case nonwovens costs of 13 euro cents for meltblown and three cents for spunbond, materials represent between 21% and 30% of total costs, while for the more advanced lines, the percentages rise to a range of 61% to 64%.
The advanced machines have much higher assumed throughput than the basic lines. In the case of respirators, the advanced lines are assumed to produce 100 per minute, compared with 30 per minute for the basic lines. For the three-ply mask lines, the difference between the advanced lines and the basic machines is even more dramatic: 400 per minute versus 50.
The actual throughput experienced by an operator could vary from these numbers, as would the costs, depending on factors like the specific equipment installed in the plant, skill and training of the crew, and the product specifications that are used, among others.
Nevertheless, it is clear that for a high-volume mask-making operation the advanced lines would allow the producer to sell its output at a much lower market price than the basic lines.
The study did not examine capital costs for the various lines, and a more basic line could have an economic advantage if the operator doesn’t need to produce the volumes generated on a sophisticated machine. On the other hand, the basic lines place more reliance on training and management of the production crew, since both quality control and throughput are so dependent on the crew’s performance.
4. Why worker skill and efficiency matters
The advanced machines require efficient workers as well. With materials being such a big item in the advanced operation’s budget, production waste caused by improper operation of the machine would have a big impact on the bottom line.
The same thing could be true if the operator ordered sub-optimal raw materials in order to save money.
Packaging costs can vary widely depending on the type of packaging chosen; and it is easy for a surprise in packaging costs to have a major, unexpected impact on the operation’s bottom line.
Dr. Ilyukhina’s cost models allow you to plug in your own cost assumptions to see how the net cost per mask would be affected by each change. In her interview, she also walks through what factors created a learning curve in for mask producers.
Take a deeper dive: Model your own costs
Understand the impact of volatile raw material costs of facemasks. Model your own face mask manufacturing costs, including two for three-ply masks and two for FFP2/N95-type respirators.
Plus, read an in-depth interview with Dr. Ilyukina to who explains the learning curve of mask making.