PETALING JAYA: Persistent structural headwinds will continue to weigh on the outlook for the rubber products industry, says RHB Research.
It said prolonged oversupply, intensifying competition across the United States and non-US markets, as well as subdued pricing power, would affect the industry.
The brokerage noted that any recovery could be soft and largely sentiment-driven rather than underpinned by fundamentals, despite rubber-related stocks having undergone a recent rerating.
Despite Chinese glove manufacturers being fairly absent from the US market, RHB Research said channel checks indicated rising price pressure among Malaysian producers, led by Top Glove Corp Bhd
’s recent average selling price (ASP) cuts.
It added that assuming shipments into the United States and ASP stay flat, Top Glove may gain market share, but this would not be sustainable, as its edge is primarily latex-led.
“With latex concentrate prices likely to rise in the fourth quarter of 2025 (4Q25) amid seasonal heavy rainfall across South-East Asia, Top Glove’s cost advantage could narrow,” it said.
However, export volumes for the 3Q25 have rebounded with July seeing an increase of 64%, though August recorded a decrease of 6%.
“Restocking activities (have) started, which we believe are driven by the depletion of inventory from front-loading activities in the 4Q25 and the expiry of leftover inventories from the pandemic,” it said.
Import data from the United States indicated that in July, the majority of the export volume increase was directed to non-US markets while the United States now accounts for 45% of Malaysia’s glove exports, down from 75% in June.
Furthermore, RHB Research said operating expenses in the second half of 2025 were not as steep as expected, due to glovemakers being exempted from the 5% sales and service tax (SST) applicable to raw material imports.
Maintaining an “underweight” call, RHB Research recommended investors stick to efficient players with greater exposure to non-generic products, such as cleanroom gloves, with its top pick being Kossan Rubber Industries Bhd.
Key risks include a stronger US dollar, faster-than-expected capacity expansions, increases in glove ASPs, and lower-than-expected raw material prices.
