COVID-19 impact assessment and outlook on personal protective equipment

Summary

• UNICEF and partners have been impacted by unprecedented market conditions for COVID-19 supplies, particularly for PPEs, and notably face masks, N95 respirators, and medical clothing. Demand is outstripping supply availability and the actions of other buyers and responses by sellers create additional challenges for UNICEF and partners to access affordable PPE supplies on behalf of low- and middle-income countries (LICs and MICs).
• Demand for PPEs has reached unprecedented levels as COVID-19 has spread globally and governments have sought to prepare and respond. National stockpiling strategies by affected countries have further driven up demand. During Q1 2020, the UN have delivered over 6.4 million gloves, 1.8 million surgical masks, and 1 million gowns to countries across the world. However, an enormous gap remains between what UNICEF and partners have secured and the demand requirements for LICs and MICs. UNICEF estimates needs through the end of the year could reach 2.2 billion surgical masks, 1.1 billion gloves, 13 million goggles, and 8.8 million face shields.
• Supply availability has been hampered by a number of issues, including export and travel restrictions by some producing countries, and lockdowns that have forced suppliers to (temporarily) shut down.
• Suppliers domiciled in China make up the largest share of the market. Some of the early supply constraint related to the lockdowns as part of the Chinese government’s response to COVID-19. Since restrictions have eased, China’s manufacturing capacity has normalized, and improvements in PPE supply availability have been observed by UNICEF and partners. Nonetheless, short-term and longer-term market challenges remain due to the limited availability of raw materials for some PPE supplies, as well as the uncertainty in the magnitude of needs and the longevity of the demand for these products.
• Given that shortages are felt globally, including in high-income countries (HICs), willingness to pay of some buyers significantly outstrips what aid agencies and LIC and MIC governments can afford. In some instances, prices for specific items have been more than 20 times historic levels.
• UNICEF has also faced an unusual combination of operational challenges operating in this market: Manufacturers and sellers demand significant advanced payments to secure access to their supplies and offers to UNICEF procurement requests have very short validity (e.g. 24 hours). Confirmed orders have been subject to sudden cancellations. All this makes even the anticipated and contracted supply somewhat uncertain.
• Under the aegis of a WHO-led COVID-19 Supply Chain Inter-Agency Coordination Cell (SCICC), and in combination with several UN and other aid agencies, UNICEF convened a consultation with PPE manufacturers and suppliers in early April to discuss market challenges and to share a joint forecast to assess how the UN and the PPE manufacturer/supplier base could increase access to quality assured products at affordable prices for LICs and MICs. The UN inter-agency and industry consultation laid the ground for a coordination platform, that will orchestrate joint efforts by UN buyers to procure supplies and to establish a global air freight strategy to ship supplies.
• UNICEF launched a joint tender in April on behalf of several UN organizations for the period covering through the end of December 2020 for PPE supplies.

UNICEF procures PPE supplies for infection prevention and control (IPC) for airborne and droplet precautions. It includes medical equipment, and medical clothing for standard precautions to extend biological protection barriers, and waste management.

Since the start of the COVID-19 outbreak, UNICEF has been undertaking a continuous assessment of the impact on sourcing essential and strategic supplies, including those used in the response to the disease such as personal protective equipment (PPE). PPE items are used by frontline healthcare workers in the response and the equipment include surgical face masks, N95 respirators, gowns, faceshields, coveralls, and gloves (Table 1).

This document provides an overview of the current and anticipated near term effects of COVID-19 on UNICEF’s access to PPE supplies and the risk mitigations UNICEF has undertaken or to be actioned:
 

COVID-19 PPE market situation

The current state and environment of the PPE market changes on a daily basis. It is characterised by extremely high global demand as the outbreak spreads across regions and territories. The market is also characterised by multiple government bans on exports, or legislation that creates barriers to trade including on raw materials necessary for PPE production. For example, on 14 March, the European Commission published a Commission Implementing Regulation (EU) 2020/402 to ensure that no exports of PPEs destined for outside the European Union (EU) proceed without the export authorization from the manufacturing member state^.1

The US and European governments have also surged their procurement of PPE. Initially, there was very limited coordination and virtually no hindrance to paying high prices. Competition and speculation from multiple buyers, intermediaries, and traders further exacerbated the market challenges. The surge in demand and pressure on supply chains has also resulted in severe constraints on the supply of raw materials, especially for N95 masks, surgical masks, and medical gowns, which are the products in highest demand (given their importance for frontline healthcare workers). Given the demand and supply imbalance, manufacturers needed advanced payments from buyers to secure orders for raw materials and to reserve manufacturing capacity.

Current state of supply

China is the largest producer of PPE finished products, as well as of many of the raw materials needed to manufacture these products. China produced an estimated 50 per cent of surgical masks globally (estimated to be 20 million masks a day, pre-pandemic). Taiwan alone makes up 20 percent of the global supply of face masks, while other countries with PPE production capacity include India, Japan, Korea, Malaysia, Mexico, Thailand, United States (US), and several European countries. China reportedly boosted the production of masks more than five-fold earlier this year, providing a daily production capacity of 110 million units and has likely increased production further since that time.²

Face masks, including surgical masks and N95 respirators, have been facing the largest supply constraints since the COVID-19 outbreak has worsened. The majority of stocks normally held by manufacturers, wholesalers, and distributors have been depleted in addition to an increasing order backlog. Due to the extremely high demand for IPC and PPE supplies and limited supply availability, existing UNICEF suppliers are not able to meet UNICEF’s demand.

From the beginning of March 2020, there have been signs of improvement in PPE supply availability, in part as a result of China’s production normalizing. Manufacturers in China have indicated that their production lines are up and running but depend on access to raw materials, highlighting the concern and the importance of securing the raw materials for face masks, gowns, and coveralls. On the other hand, the government of India has extended its export ban to all PPE products including raw materials, such as non-woven fabrics used to manufacture face masks and other protective clothing. That has been followed by an export ban many other countries.

During March and April 2020, UNICEF increased its ‘pipeline’ of contracted supply from thousands of units to the scale of millions of units of PPE products scheduled for delivery in March, April, and May 2020 (Figure 1). Despite markets now facing severe disruptions and significantly increased pricing pressure, UNICEF has been able to maintain reasonable prices across the different PPE commodities.

UNICEF has reached out to more than 1,000 suppliers (including manufacturers and wholesalers) and industry leaders globally, to find a solution to current market constraints. Despite the extreme market conditions, including aggressive buying, since the end of January, UNICEF has successfully managed to secure availability from suppliers for key products, such as 50 million surgical masks, 24 million respirators, 6.9 million coveralls, 3.6 million surgical gowns,1.9 million goggles,110,000 infrared thermometers and 31.6 million face shields, among many other items, of which a portion has already been delivered and supplied to countries. However, the majority of PPE that have been procured are scheduled for delivery from April - June 2020, of which over 90 per cent are being produced and shipped out of China.

UNICEF has noted many new market entrants have been seeking to supply through UN aid agencies. These manufacturers and sellers are unfamiliar with UN procurement guidelines and many have offered unfavourable commercial terms (e.g. very high prices, significant advanced payments, with an offer validity for 24 hours) to secure production capacity. In spite of advance payments, UN aid agencies have noted that some suppliers are failing to deliver on supplies after confirming orders or are cancelling purchase orders – causing further disruptions to the COVID-19 response efforts in LICs and MICs.

Historic and current state of demand

UNICEF has historically procured PPE products for use in emergency response and as part of its health kits, Emergency Supplies List (ESL), and stocks held at its warehouse in Copenhagen for emergency response. UNICEF’s historical annual PPE procurement averaged USD 3.8 million over the past five years, in global market for PPEs valued at an estimated USD 50.9 billion in 2019 (covering all major industry sectors, including manufacturing, oil and gas, as well as healthcare).³ UNICEF’s average annual procurement of both gowns and coveralls on behalf of some LICs and MICs for 2017-2019 did not exceed 50,000 units per year. Similarly, the annual average usage for all different types of face masks sourced via UNICEF did not exceed 25,000 units. However, with the impact of the COVID-19 outbreak, and the demand for some PPE products specifically used in response to COVID-19 have risen as high as 1000-2000-fold. UNICEF’s current demand estimates for gowns and coveralls for a three-month period is approximately 25 million units, and the current demand for face masks, both surgical and N95 masks, in response to COVID-19 exceeds 55 million (Figure 2).

Notes:

1  European Commission, Commission Moves to Ensure Supply of Personal Protective Equipment in the European Union, European Commission, Brussels, 15 March 2020.

2  South China Morning Post, China Boosts Face Mask Production Capacity by 450 Per Cent in a Month, SCMP, March 16, 2020.

3  Grand View Research, Personal Protective Equipment Market Size, Share and Trends Analysis Report By Product (Respiratory Protection, Protective Clothing), By End Use (Chemical, Oil & Gas, Mining, Construction), And Segment Forecasts, 2020-2027, Grand View Research, San Francisco, February 2020.