A GOOD insight into the rubber glove sector and its outlook can be gleaned from two reports recently produced on the sector.
They can be found in the prospectus of Top Glove Corp Bhd’s (pic) Hong Kong listing and the draft prospectus of Harps Holdings Bhd, which is going for a listing on Bursa Malaysia.
A key message that can be derived from both reports is that the global demand for gloves is poised to stay high in the next few years to come, far exceeding the global output in 2019 prior to the Covid-19 outbreak.
Rising hygiene awareness and a stricter standard operating procedure among businesses, including in non-healthcare industries, would help to keep the demand for gloves high.
This would be further boosted by the demand growth from countries that previously had low glove consumption per capita. Among such countries are Brazil, China, Egypt, Mexico, India and Pakistan.
In the draft prospectus of Harps, independent business consulting firm Vital Factor says the supply of gloves will match demand in 2023.
As a result of the increased glove production globally, average selling prices (ASPs) of gloves are likely to decline after peaking this year.
Based on a Frost & Sullivan report quoted in Top Glove’s prospectus, the ASP of medical-grade gloves would hit US$65.4 (RM267.98) per 1,000 pieces in 2021, as compared to just US$19.2 in 2019.
By 2025, the price would normalise back to US$21.5.
Top Glove says that the expected decline in the glove ASP is due to the rising glove supply and the reduction of production costs as technologies and productivity improve.
The glove maker also points out that every type of glove had recorded a slight decline in its ASP before the pandemic.
This is due to intensifying competition in the glove market, as well as advances in manufacturing technologies, resulting in lower production costs.
“In 2019, the ASP of nitrile latex, natural rubber latex, vinyl and medical gloves fell to US$23.1, US$18.0, US$11.9 and US$19.2 per 1,000 pieces.
“However, the ASP of gloves increased substantially in 2020 on account of increased demand due to the supply shortages created by the Covid-19 pandemic and higher raw material costs, ” it says.
Meanwhile, Vital Factor estimates the global supply of gloves in 2020 at 327 billion gloves, marking a growth of 26% compared to the previous year.
According to Vital Factor, the global glove supply in 2021 is forecast to grow 43%, driven mainly by existing manufacturers and new entrants coming onstream.
“The output from the top-four Malaysian manufacturers is expected to grow 32%, while output from Thailand’s largest manufacturer, Sri Trang, and China’s two large manufacturers, Blue Sail and Intco, is forecast to collectively grow by 60% in 2021.
“In 2022, the global supply is forecast to grow 25%. This will be driven by the increase in the collective output of Sri Tang, Blue Sail and Intco by 62%, while the top-four Malaysian manufacturers are forecast to increase their collective output by 19% compared to 2021.
“The collective output of the top-four Malaysian manufacturers and the three large foreign manufacturers is forecast to represent 41% and 16% of the total global supply respectively in 2022, ” it says.
The report further adds that by 2023, the world is expected to see a surplus in production capacity exceeding demand by 18%, followed by a 49% surplus in production capacity by 2024.
Vital Factor believes that the ASPs of gloves post-Covid-19 will not fall back to pre-pandemic levels.
“This is mainly substantiated by observations from the two latest outbreaks of virulent diseases, namely, H1N1 (2009) and the Bird Flu (2017) where the ASP grew by 15.5% and 21.5% respectively post-outbreak compared to pre-outbreak levels, ” it says.
Looking ahead, the report anticipates the increase in glove ASP to be higher than H1N1 and the Bird Flu as Covid-19 cases to date have far outnumbered the two previous outbreaks.
Apart from healthcare, Vital Factor expects increased glove consumption from additional user industries, including hotels, airlines, food services as well as personal care and beauty, to name a few.
“This is mainly due to the increase in hygiene awareness for many consumers and industries.
The current Covid-19 pandemic has also caused many organisations to mandate the use of gloves as a standard operating procedure, ” it says.
Quoting Frost & Sullivan’s report, Top Glove says that governments are also expected to continue stockpiling personal protective equipment (PPE) such as gloves, face masks and protective clothing in preparation for future waves of Covid-19 and regular flu seasons.
It also says that it is unlikely for the glove manufacturing industry to see a price collapse or an excessive production capacity in the next five years.
The global demand is expected to remain strong and stable, with global per capita health expenditure and sales value of the global PPE market expected to increase at a compounded annual growth rate of 2.5% and 18.6%, from 2019 to 2025.
“Leading players in the glove industry have designed their capacity expansion strategies based on a comprehensive consideration of the epidemic cycle and the sustainability of demand, ” states the report.
It remains to be seen how the Covid-19 pandemic will evolve as many countries have been witnessing resurgence of infections in recent times.
The fact that individuals who have received two doses of vaccine are also infected post-inoculation raises doubts about how fast the world can recover from Covid-19.
The glove manufacturing industry stands to benefit from a more prolonged Covid-19 pandemic, amid the global vaccination drive. It would not be surprising if there are more new companies announcing their entry into the sector, leveraging on the resurgence of Covid-19 globally.