MALAYSIA: Worst likely over for rubber glove sector
The worst for the rubber glove sector is over and growth is likely to resume in the coming quarters as glove manufacturers indicated that they have started to increase selling prices to pass on the incremental costs, according to Affin Hwang Capital. “Malaysia manufacturers are acting more rationally to prevent an all-out price war, as they are willing to delay or cut capacity to maintain selling prices,” it said in a research note.
It believes that the weaker demand for gloves from Malaysia was partly due to an increase in China glove imports into the US, as buyers stock up in anticipation of the tariff hike. The research house believes that there are a few challenges limiting the glove manufacturers’ ability to raise their selling price, namely the value perception between latex gloves and nitrile gloves, overcapacity in the latex glove space and the time lag (around 30-45 days) in price-setting.
In addition, the management of both Top Glove and Supermax have commented that one of the main contributing factors for the low margin was the sharp increase in latex cost, which they were not able to pass on fully through selling price increases. “However, we believe that pressure to hike latex glove selling prices has eased, as the latex price has fallen by 13 % to MYR 437.6 per kg from the peak in 2Q19,” said the research house.
Source: “The Sun Daily”, Petaling Jaya; 9 Sept 2019
(Syed Rashid Ali, Karachi, Pakistan)