Kenanga Research projects demand for gloves to rise by 30% in 2024.
PETALING JAYA: The operating environment for glove manufacturers such as Top Glove Corp Bhd
is expected to remain challenging over the near term, mainly due to product oversupply.
Kenanga Research in a report said it expects the demand-supply situation to only start heading towards equilibrium in 2026.
“(This is) when there is virtually no more new capacity coming onstream while the global demand for gloves continues to rise by 15% per annum, underpinned by rising hygiene awareness,” it said in a report.
The research house said the Malaysian Rubber Glove Manufacturers Association projects 12% to 15% growth in global demand for rubber gloves annually from 2023, following an estimated 25% contraction to 300 billion pieces in 2023.
“We project the demand for gloves to rise by 30% in 2024 to 390 billion pieces (due to a low base effect in 2023) and resume its organic growth of 15% thereafter.
“This will result in an excess capacity of 212 billion pieces in 2024.
“The overcapacity still persists, which means low prices and depressed plant utilisation will continue to plague the industry in 2024,” it said.
Top Glove reported a drop in net loss by 68.91% to RM51.2mil in the second quarter ended Feb 29, 2024, as compared to RM164.67mil in the previous corresponding quarter.
Additionally, the group’s basic loss per share shrank throughout the quarter, going from 2.06 sen to 0.64 sen.
Revenue dropped to RM550.33mil from RM618.01mil in the previous corresponding period.
For the six-month period ended Feb 29, 2024, Top Glove’s revenue dipped to RM1.04bil from RM1.25bil previously, while its net loss narrowed to RM108.91mil from RM332.9mil.
Hong Leong Investment Bank (HLIB) Research said sales volume had continued to show encouraging growth in the second quarter of 2024.
“Top Glove benefited from customers’ inventory replenishment and trade diversion arising from Chinese players being placed on import alert by the US Food and Drug Administration.
“Management guided that sales volume will remain robust in March and April 2024, which would help lift utilisation rate and translate to better operating efficiency.”
Additionally, HLIB Research said average selling prices (ASPs) are also expected to increase from April onwards, as Top Glove passes on the higher costs to buyers.
“As for raw material prices, natural rubber price is expected to ease in May while nitrile-butadiene rubber prices should soften in June.
“Furthermore, with demand on the rise, Top Glove had in recent months reopened one of its previously closed plants. Additionally, the company plans to reactivate two more plants in April and May.”
Meanwhile, MIDF Research said raw materials pricing for natural rubber latex concentrate is expected to peak in April this year and soften the following month in May.
It added that nitrile latex is currently on an uptrend and is expected to soften in June this year.
“This would indicate that the oversupply of gloves in the market had slowly been depleted and demand grew in tandem to the limiting supply.
“Once the raw material price trends downward in the second half of Top Glove’s current financial year, we expect that the mismatch of ASPs and raw material cost will be beneficiary to the group.”
