Malaysian rubber glove maker WRP Asia Pacific Sdn. will begin winding down its business operations this month, citing "severe disruptions across global energy and petrochemical supply chains” caused by the Middle East conflict.
WRP has suffered from "significant” increases in costs for petrochemical-derived raw materials and chemicals while facing uncertainty about procurement timelines and suppliers that increasingly require advance payments, the company said in a March 31 letter addressed to customers, which was reviewed by Bloomberg News.
"These unforeseen circumstances have forced us to make the difficult but necessary decision to begin the process of winding down business operations with effect from 15 April,” the letter said.
The announcement comes as the US- and Israel-led war creates the largest oil supply shock in decades, stoking inflation, rattling financial markets and pushing up costs for everything from food to fuel. It has also put industries such as glove manufacturers at risk, as they rely on imports of nitrile latex - a synthetic rubber - whose prices are linked to energy markets.
The letter and impending wind-down was confirmed by Nadarajah Swaminathan, general manager of operations. He added that the company is awaiting feedback from shareholders, and that potential buyers of the glove maker could emerge.
It’s unclear how much relief the industry may see with the just-announced two-week ceasefire and Tehran’s agreement to reopen the Strait of Hormuz.
Days before WRP sent its letter, the Malaysian Rubber Glove Manufacturers Association, an industry group, warned that the blockade of the Strait of Hormuz had caused a shortage of a key raw material, placing an "immense financial strain on local manufacturers” and threatening the global supply of medical gloves.
Disruptions to supplies of global crude and refinery operations have driven up raw material costs by more than 50%, prompting the world’s largest glove maker Top Glove Corp. Bhd., to raise prices, the company said in a statement to Bloomberg. It’s encouraging customers to consider natural rubber gloves instead, it said.
"The primary raw material affected is nitrile latex, a key raw material used in the production of nitrile gloves,” Top Glove said, adding that disruptions from the war has tightened supplies of butadiene and acrylonitrile, chemicals that give gloves elasticity and durability. It has sufficient raw material inventories for April, and is proactively securing supply for May in order to provide uninterrupted deliveries to customers, it said.
The price of butadiene, a colourless gas that’s a core ingredient for disposable gloves, has climbed nearly 70% since the war, according to data compiled by Bloomberg. Butadiene can account more than half of nitrile latex costs.
Shortages of raw materials and skyrocketing prices are amplifying the unfavourable cost structures of Malaysian glove makers compared with regional competitors, according to Chan Wone Fu, a former chief executive officer of Smart Glove Holdings Sdn. "Those glove companies which do not have nitrile butadiene rubber latex in their inventory would have to reschedule their production,” he said.
Malaysia produces roughly 45% of the world’s rubber gloves and exports them to 195 countries, the association said in a March 26 statement.
Closely held WRP makes surgical, examination and specialty gloves used across health-care, food processing, and beauty industries, according to its website. It experienced a surge in sales and profits during the pandemic but has been through a difficult stretch since. It posted a RM78mil loss on RM204.6mil of revenue in the year ended June 2024, regulatory filings show. - Bloomberg
