MALAYSIA: Better second half seen for gloves industry

The market and demand for gloves is still very strong and the industry is expecting a better third and fourth quarter, according to Malaysian Rubber Glove Manufacturers Association (Margma).

The association also brushed off assumption that there is a production glut in the industry, but warned that rising production cost is putting a squeeze on producers.

“Matured and seasoned manufacturers were adjusting prices to suit the sluggish world economic situation beginning of last year into the first half of this year as well,” Margma president Denis Low Jau Foo said in a statement.

Low said gloves prices were expected to rise in the coming months, as producers seek to pass on the higher production to their customers.

“The ramifications of the increased cost of raw materials plus the increase of gas prices from July 2016 onwards and the minimum wage have been seriously felt by the rubber glove industry and it is timely that they must now increase their pricing in order to stay in the business meaningfully,” Low said.

MARGMA expects production costs for rubber gloves to increase for the next few months and would probably continue into the second or even third quarter of 2017 in view of the rising cost of raw materials.

Low said the prices of both natural and synthetic rubber have been on an increasing trend since late last year until now and the upward trend was expected to continue through the first half of 2017 and right up to the third quarter.

The production cost for natural rubber latex gloves will see an increase of between 6-10% or by USD 1 - USD 1.50 for 1,000 pieces of gloves, depending on the product type.

It is also presumed that synthetic rubber gloves (nitrile) will see an even greater increase in production cost due to the shortage of butadiene, an important ingredient of synthetic rubber compound.

In the past two months, the production cost of synthetic rubber latex gloves has seen an enormous increase of 12%-15% or by at least USD 1.50 - USD 1.70 for 1,000 pieces of gloves.

The price of natural rubber (NR) latex is expected to increase in the next two months to reach as high as MYR 5.42 per wet kilo in December 2016. This forecast is made based on the recent price trend which saw the price of NR Latex rose by 39% in October 2016 as compared to January 2016, or a 6% cost increase as compared to September 2016.

Margma does not foresee the price of NR latex softening in the coming months as the NR latex producing countries are heading into the monsoon season, and thereafter, into the wintering period, lasting into the months of April or May 2017.

As for synthetic rubber, Malaysia is currently taking up 70% of the approximately one million ton per annum of synthetic nitrile latex which is being produced globally.

“Malaysia has the biggest nitrile latex production capacity in the world and the producer is finding it hard to absorb the cost and will definitely have to pass on to rubber glove manufacturers.

“It must be noted that due to margin erosion and depressed nitrile latex prices since the end of last year till now, there is a general slowdown in capacity expansion for nitrile latex production in the second half of 2016. This can only mean higher cost as we move along,” Margma said. Apart from the cost of NR and synthetic latex, the natural gas price hike with an average increase of 6% on 15 July 2016 also pushed up the production cost for all types of rubber gloves. This was on the back of the natural gas price hike by 17.2% on 1 Jan 2016.

But despite the expected price increase, Low expects demand for gloves to remain strong.

Source: Daily “The Star”, Kuala Lumpur; 1 Nov 2016

(Syed Rashid Ali, Karachi, Pakistan)