PETALING JAYA: The Malaysian Rubber Glove Manufacturers Association (Margma) is expecting the global glove demand to normalise to pre-pandemic levels in 2023, says MIDF Research.
Margma expects global glove demand to hit 300 billion pieces this year, up from 280 billion pieces in 2018 and 340 billion pieces in 2019.
Despite some green shoots having appeared with some buyers participating in short-term restocking activities, MIDF Research predicts restocking activities will be subpar, as most countries have entered the endemic phase following the reopening of borders.
The research firm noted challenges remain for glove makers in the near term, as the excess supply of gloves in the market continues to affect the industry’s average selling price (ASP), followed by persisting low utilisation rates.
Local glove manufacturers have been losing money in recent quarters due to a combination of low utilisation costs, which cause high production costs, and a low ASP, which have reduced profit margins.
MIDF Research, in a report, noted the utilisation rate fell from 35% to 40% in the fourth quarter of 2022 (4Q22) to 32% to 35% in 1Q23, which was barely half of the rate in 2019.
The number of glove makers listed as associate members of Margma have significantly increased during the Covid-19 pandemic.
However, in comparison to the total worldwide supply of gloves, their production capacity is negligible, and hence, may fail to alleviate the market’s excess stock situation.
The rising raw material cost is set to have an effect on the production cost. Butadiene price, for instance, has risen 25.8%, while acrylonitrile by 10% and natural rubber (NR) latex concentrate by some 4.5%, partly owing to high demand from synthetic rubber in downstream applications such as vehicle tires, paint, shoe bottoms and others.
Moving forward, MIDF Research believes the raw material prices will stay high due to decreased NR latex concentrate production during the winter season until May 2023, as well as increased demand for butadiene and acrylonitrile.
MIDF Research highlighted the ASP revisions may just be merely testing the waters to gauge consumer reaction before committing to a greater price hike. The research house maintained a negative near-term outlook on the sector and a “neutral” call, with Hartalega Holdings Bhd
the top pick for the sector with a target price of RM1.80 per share.
