SHANGHAI — Million-dollar wire transfers to strangers. Rumors of hidden supplies in forgotten warehouses. Wheeler-dealers trying to talk regulators and customs officials into letting that one precious shipment through.
Global desperation to protect front-line medical workers battling the coronavirus epidemic has spurred a mad international scramble for masks and other protective gear. Governments, hospital chains, clinics and entrepreneurs are scouring the world for personal protective equipment they can buy or sell — and a new type of trader has sprung up to make that happen.
The market has become a series of hasty deals in bars, sudden calls to corporate jet pilots and fast-moving wire transfers among bank accounts in Hong Kong, the United States, Europe and the Caribbean.
The stakes are high, and so are the prices. Wholesale costs for N95 respirators, a crucial type of mask for protecting medical workers, have quintupled. Trans-Pacific airfreight charges have tripled.
“It’s a global free-for-all, trying to get capacity,” said Eric Jantzen, the vice president for North America at Vertis Aviation, an aircraft and air cargo brokerage based in Zurich. “And the prices reflect that.”
The hurdles keep rising. On Tuesday, after complaints from Europe about shoddy Chinese masks and ineffective test kits, China’s Ministry of Commerce ordered manufacturers to provide further assurances that their products met standards.
World leaders are moving to get supplies, but they are still grappling with the vast scope of the problem. The White House announced over the weekend that it had organized 22 flights to airlift personal protective equipment. They are aimed at resupplying hospitals that are within 72 hours of running out of protective equipment, said Gregory Forrester, the chief executive of National Voluntary Organizations Active in Disaster, a group that works with American federal and state officials.
“If any one of these planes don’t take off,” Mr. Forrester said, “that’s going to be an issue.”
China vacuumed up a big share of global supplies after the outbreak emerged in January. It imported two billion masks in a five-week period starting then, according to Chinese customs data, roughly equivalent to two and a half months of global production. It also imported 400 million pieces of other protective gear, from medical goggles to biohazard coveralls.
Now, China has become a major part of the solution. Already a giant in mask manufacturing, it has ramped up production to nearly 12 times its earlier level of 10 million a day. It was a huge mobilization effort that involved redesigning freight train routes and sending large numbers of workers across the country in sealed buses.
The Chinese government has encouraged global deals, but buying and selling masks is no easy feat. Traders, some just weeks into their unstable careers, have to navigate confusion, fraud attempts, byzantine customs laws and other barriers.
Many say they sell directly to hospitals and others who need the equipment, not to speculators. Altruism aside, hospitals are also less likely to default on payments and more likely to know precisely what is in demand.
“It becomes so much easier when you deal with the procurement professionals, because they know exactly what they need,” said Blake Noah, a private banking art consultant who now arranges mask shipments in Shanghai.
Some factories make products of suspect quality, and some sellers will even try to swindle buyers. Last Thursday, a court in the Chinese city of Shaoxing sentenced a man to over 10 years in prison for repeatedly selling what looked like a cargo of masks but had only tree branches inside.
Mask traders in Shanghai say they have wasted time bargaining over rumored caches of masks before concluding that the only reliable suppliers are top managers at the factories themselves.
“I’m still being put in touch with people who claim to have caches of 3M-branded masks,” Mr. Noah said. “But I’m skeptical such caches exist after looking at four or five phantom caches.”
Some Chinese factories remain reluctant to sell to foreign buyers. National government agencies and local officials often give conflicting advice and say the factories should meet local needs first.
“When we try to place larger orders, some are saying there’s a limit or there are restrictions,” said Noah Silverman, a Chicago banker who has jumped into trying to help hospitals in the United States.
Some Chinese companies say they are ready to sell masks globally. Henan Doria Mechanical Equipment, a company in Zhengzhou that once made overhead cranes and electric hoists, has reinvented itself as a maker of N95 respirators and tells traders that it can meet orders for up to two million masks within 15 days.
Once masks are found, they have to be transported. China’s cancellation of almost all of its international passenger flights to slow the spread of the virus has made it hard to move goods quickly. Half the world’s air cargo used to move in the bellies of passenger planes.
Jason Yuan, a manager at a state-owned trading company in Beijing, said his company had sent out small samples of N95 respirators to Europe, Cambodia, the Philippines and the United States.
“In other countries, the packages have arrived,” he said, “but in the case of the U.S., the package is still in Hong Kong.”
Zhang Qing, a senior Chinese aviation regulator, said the Chinese government was making it easier for air freighters to move in and out of the country. Airlines are even operating passenger aircraft as freighters, she said.
But China wants the United States to provide the planes for any large-scale shipments of personal protective equipment. Ren Hong, an infrastructure development inspector at the National Development and Reform Commission, said China had only 173 air freighters while the United States had more than 550.
“The development of all-cargo aircraft in China is only in the initial stage,” she said.
Regulations can cause confusion. For example, importers are still parsing shifting United States regulations regarding respirators designed for use within China.
Fredrik Barner, a Shanghai freight agent, said he refused to arrange shipping last week for a cargo of respirators because the American buyer did not have a Food and Drug Administration license for importing medical supplies. He reversed course this week after learning that the cargo involved an industrial grade of respirator that the F.D.A. is now allowing to be imported in most cases without a license.
Transportation of respirators or masks, Mr. Barner said, is “more complicated than auto parts.”
Even though many hospitals in the United States are desperate for masks, selling to them isn’t always easy.
Deals have stalled because hospitals, accustomed to paying for supplies after they reach their loading docks, have balked at the stiff terms now being demanded by factories, mask traders said. They also fear fraud.
Producers of N95 respirators and surgical masks now insist that orders come with a 50 percent down payment, with the rest of the money due before the masks ever leave the factory gate, said Michael Crotty, the founder and president of Golden Pacific Fashion & Design in Shanghai. The company has switched from manufacturing curtains to placing orders for respirators and masks with its Chinese fabric suppliers.
Factories sometime fill orders out of sequence, moving the highest-paying customers to the front of the line, he added.
“It’s a seller’s market,” Mr. Crotty said. “You don’t see this very often.”
The fractious nature of the American medical system, which lacks a centralized purchasing authority, adds to the problems. In the United States, President Trump told state governors on March 16 that they should find respirators and ventilators themselves.
Mr. Crotty said he had been working on a request from the State of New York but had struggled to figure out the paperwork.
“It’s nuts because we’ve had to fill out the form two different times,” he said, “and they call and say we need to fill out the form again.”
Mr. Crotty is a 70-year-old chief executive who grew up in a family-owned curtain business in Ohio and never left the industry. When a supply crisis erupted for N95 respirators, he knew whom to call: His company’s nearby curtain factory previously used almost the same kind of fabric found in N95 respirators to make the bottom liners of pet beds.
“Several factories with which Golden Pacific had been working switched to making masks,” he said, “and they asked us to help market them.”
In the former French Concession neighborhood of Shanghai, some of the traders who handle masks gather several nights a week at a Western bar that specializes in grilled-cheese sandwiches.
One regular is Mr. Noah, a 37-year-old Iowan who used to shuttle among Shanghai, Singapore, London and Hong Kong to advise the super wealthy and their private bankers on art investments. He started learning everything he could about masks after hearing false rumors that private banking clients had stockpiles of them, then realized he could make a business out of representing foreign buyers in transactions with Chinese factories.
After eating his sandwich, he goes home and stays up until 5 every morning, working the phones. “I haven’t been sleeping more than a little for days,” he said.
Coral Yang contributed research.
