Glove makers in for a good run this year


RHB Investment Bank in a recent report said it expects the average selling price uptrend to sustain, due to the glove deficit of 7.4 billion pieces.

GLOVEMAKERS are set to continue recording stronger earnings in 2021, on the back of higher average selling prices, increase in production capacity and better economies of scale.

An analyst with a local bank-backed brokerage said demand for rubber gloves will continue to be strong next year, mainly due to the impact of the Covid-19 pandemic and distribution of the vaccine across the globe.

“The surge in infections across the globe has ramped up demand for rubber gloves.

“The gradual availability of vaccines is also anticipated to boost demand for gloves, ” he said.

Last month, Top Glove Corp Bhd chairman Tan Sri Lim Wee Chai said the demand for examination gloves is expected to double once the vaccines are ready to be deployed, noting that “examination gloves are needed to inject vaccines.”

He said the world would need “to produce seven billion vaccines and will need seven billion pairs of gloves.”

Meanwhile, RHB Investment Bank in a recent report said it expects the average selling price uptrend to sustain, due to the glove deficit of 7.4 billion pieces.

“We expect total demand of 384.2 billion pieces per annum to exceed the total supply of 376.8 billion in 2021. Demand will be driven by the US, which was the top glove consumer in 2019 (35% of global demand).

“Note that Covid-19 cases there remain extremely high. Additionally, glove demand may increase if vaccines are approved in more countries.

Factors that may limit supply include foreign worker and nitrile butadiene shortages and infections among the workforce of glove producers.”

Another analyst said 2021 could see more firms diversifying into the global glove market to capitalise on the booming sector.

“A slew of companies have announced that they are expanding their business into glove manufacturing this year. We won’t be surprised to see more companies hopping on the bandwagon in 2021.”

Just last week, ceramics and pottery products manufacturer KTG Bhd announced that it is planning to expand into the glove manufacturing business, while property and construction group Jiankun International Bhd revealed that it is venturing into nitrile latex production.

An analyst said the earnings for glove manufactures will also be boosted by the fact that there will be no windfall profit levy on rubber glove companies.

“This would bode well for glove makers going forward, ” he said.

Earlier this month, the government said it had no plans to impose a windfall profit levy on rubber glove manufacturers that are enjoying super normal profits from the higher demand and selling price of rubber gloves worldwide, nor to other businesses that have profited greatly due to the Covid-19 pandemic.

CGS-CIMB, meanwhile, said it expects global glove demand to outstrip incoming new capacity.

“We expect that in the next two to three years, global glove supply will grow between 15% and 25% annually on the back of higher usage and increased healthcare awareness globally.

“Despite glove makers’ aggressive expansion plans to capture this demand growth, the global supply growth in the next two to three years would likely still not catch up with the demand increase, in our view. This assumes that there would be no supply disruptions or delays in expansion plans.”

The growth projection is in line with that of the Malaysian Rubber Glove Manufacturers Association (Margma).

It was reported that Margma is projecting an annual demand growth rate of around 15% and 20%, going forward, with the country’s projected export revenue to be RM34bil in 2021 and global demand set to hit 420 billion pieces of gloves.

RHB, meanwhile, said even the end of the Covid-19 pandemic would not mean the end of long-term glove demand growth.

“After the H1N1 pandemic from 2009 to 2010, demand for gloves dipped slightly year-on-year in 2011 by 1.3% or two billion pieces per annum to 148 billion pieces per annum.

“The growth continued from 2012 onwards and remains on an uptrend, ” RHB said.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3

Gloves , Top Glove , Lim wee Chai , CGS-CIMB , Covid-19 , vaccine ,

   

Did you find this article insightful?

Yes
No

87% readers found this article insightful

Next In Business News

Morgan Stanley CEO's annual pay rises by over 20%
‘Unstoppable’ luxury stocks remind some investors of US tech
Ambani’s Reliance doubles down on 5G pledge after record profit
PUNB offers payment deferment, rental discount
CPO futures may undergo technical correction next week
Blackstone-backed Patria eyes expansion in Latam, Asia
METALS: Tin, aluminium, copper prices down
Oil price falls on China's COVID-19 cases, high crude build
IBM, Intel slump weighs on Wall St as coronavirus concerns rise
GLOBAL MARKETS-Weak data, earnings drag stocks lower

Stories You'll Enjoy