PETALING JAYA: Malaysia’s glove sector may be facing a “possible blessing in disguise” as geopolitical disruptions reshape supply dynamics, although analysts are maintaining a cautious stance.
Hong Leong Investment Bank Research (HLIB Research) reiterated its “neutral” call on the sector, noting that any meaningful upside hinges on a prolonged Iran conflict that continues to disrupt key raw material flows.
The ongoing Strait of Hormuz blockade has emerged as a critical pressure point.
According to the research house, the disruption has directly constrained the availability of nitrile butadiene rubber (NBR) used in medical gloves as naphtha shipments from the Middle East are curtailed.
Naphtha is a key upstream input in the production chain for NBR, the primary material used in medical gloves.
Butadiene, a core component of NBR, is derived from the C4 stream of naphtha steam cracking, making it particularly vulnerable to supply disruptions.
The research house had earlier projected global glove utilisation rates at around 67% in 2026, with supply significantly exceeding demand.
However, it now estimates that a 37% drop in naphtha supply could translate into a roughly 25% reduction in global glove capacity, lowering annual output to about 384 billion pieces versus a demand of 341 billion.
It said such a shift would meaningfully narrow the excess glove supply situation and potentially support a gradual recovery in pricing power, given that demand for gloves remains highly inelastic.
Importantly, the impact is unlikely to be evenly distributed across the sector.
HLIB Research believes “larger glove producers are likely to benefit... at the expense of smaller players”, citing structural disadvantages among smaller firms.
These include their reliance on single suppliers and tighter cash positions, especially as NBR suppliers have begun requiring a “20% to 30% down payment, with the potential for higher prepayments if geopolitical tensions persist”.
Even established players such as Top Glove Corp Bhd
, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd are currently generating subdued returns, with recent returns on equity of about 3.7% to 4%, well below their cost of equity.
For smaller manufacturers, the combined pressures of raw material shortages and higher upfront costs could prove existential, potentially leading to plant shutdowns or permanent exits.
HLIB Research said, “The longer the Iran war lasts, it could (paradoxically) accelerate the market’s return to equilibrium by weeding out weaker producers.”
