(Yicai Global) March 11 -- Malion New Materials will spend CNY120 million (USD17.2 million) to build production lines with annual capacity of 8,000 tons of meltblown non-woven fabric, an important raw material for face masks, and production equipment for related intermediate products to meet growing market demand, it said in a statement today.

Malion's shares [SHE:300586] shot to the 10 percent daily limit up to stop trading at CNY24.05 (USD3.46) this morning on the news, like those of several of its peers who have announced similar schemes.

The Shantou, Guangdong province-based company plans to buy and install nine meltblown fabric production lines and related intermediate material processing equipment sets after cleaning and reconfiguring an existing 10,000 square-meter plant, it said in the statement. The estimated construction period is one year.

Of the total investment of CNY120 million, the firm will use CNY70 million to buy the equipment and technology, CNY20 million to clean and renovate the plant, and the remaining CNY30 million as working capital. The project will achieve an annual revenue of about CNY400 million and a net profit of about CNY100 million after it starts production, per preliminary projections, the statement added.

China usually needs about 20,000 tons of face mask fabric per year but demand has surged amid the Covid-19 epidemic. Prices have risen as much as 20 times in some regions as a result.

Meltblown non-woven fabric, one of the raw materials for masks, is made of polypropylene and processed through a modified process. It is a key material to form the middle layer that prevents bacterial penetration. The supply of upstream polypropylene raw materials is quite adequate, but the existing production capacity of meltblown is finding it difficult to meet the soaring demand caused by the epidemic.

China turned out 53,500 tons of the felt-like fabric in 2018. This was also used in environmental protection, clothing, battery separators and cleaning towels, according to public data.

Many listed companies have recently turned to building meltblown plants to clear the supply bottleneck. China Petroleum & Chemical Corp. first announced its CNY1.2 billion investment on production lines with daily output of 12 tons of the material for N95 masks and 18 tons for surgical face masks on Feb. 20. Senior Technology Material and Shouhang High Tech Energy also later declared their construction plans.

Editor: Ben Armour