Local rubber glove makers may gain from US-China trade war

Over the recent quarter, the rubber glove industry has weathered the worst, given the sharp deterioration in operational earnings per glove.

PETALING JAYA: Malaysian rubber glove manufacturers could benefit from the trade spat between the United States and China as a tariff is being imposed on rubber/plastic gloves from China.

Affin Hwang Research noted that the gloves are on the US$200bil list of Chinese goods that would be subject to a 10% import tax.

“The 10% tariff on medical gloves (rubber/synthetic and plastic) will certainly hamper China manufacturers’ competitiveness, as gross profit margins for the efficient Malaysia manufacturers are only at 15%-20%.

“We believe that Malaysia exporters will be able to benefit from it, building on their 60% market-share base,” it said in a report yesterday.

Affin Hwang also said that the United States consumed 30% to 25% of the world’s medical gloves, and the introduction of the tariff would likely derail China manufacturers’ expansion plans to produce nitrile gloves in the near-term.

The research house added that some 70% of the medical gloves exported from China to the United States are vinyl gloves, with the remaining 30% being rubber/synthetic rubber.

“We believe that the price hike would help to build a better case for distributors, which are already pushing their clients to switch from vinyl gloves to other alternatives like rubber gloves, due to the narrowing price differences,” the research house pointed out.

“If China were to continue with its strict environment policy during the winter months (starting in October), we expect vinyl glove prices to rise further.”

It added that it was not concerned about the “Big 4” expanding their capacity by 10% to 15% despite historical demand growth of 8% to 10% as industry players are expected to phase out their expansion plans to protect margins.

The research house added that demand may also receive a boost from the switch from vinyl gloves.

It is reaffirming its “overweight” call on the sector with Kossan Rubber Industries Bhd and Supermax Corp Bhd as its preferred picks.