Hartalega: Malaysian glove sector's global dominance to persist
Malaysia is expected to continue to dominate the global glove market at least for the next few years amid the emergence of China as a major force. Hartalega Holdings Bhd, one of the world's largest producers, is confident of Malaysia retaining its leadership over the medium term despite rising competition from Chinese glove manufacturers.
Hartalega chief executive officer Kuan Mun Leong said Malaysian manufacturers would likely add a combined 223 billion pieces of gloves to their capacity between 2019 and 2022. Hartalega itself would "aggressively" increase its production capacity to up to 136 billion pieces of gloves between 2019 and 2022, Kuan said at a virtual briefing after its shareholders' meeting. He expects China to command 23 % share of the global gloves supply by end-2022, while Malaysia would still hold about 60 % of the market share. Nonetheless, Kuan said Malaysia's leadership position was dependent on the local industry remaining competitive in manufacturing, guided by automation and continued product innovation. The local operating environment must also need to be conducive for Malaysia's glove sector to continue leading the world.
"We need the government's support, and we need to have clarity on foreign labour policy as the pandemic has caused certain disruption in our operations. It is important to have clarity on the recovery plan as it will adversely affect or impact the sector," he added. Describing Chinese manufacturers as "a force to be reckoned with", Kuan said the local glove industry should recognise China's competitive presence in the ecosystem. "Malaysia is the global champion with a complete ecosystem supported by various industries and services with engineering expertise that support the glove sector. There is a total of 400 companies that support the glove ecosystem. Collectively, it is a huge economic contribution to the country. So how do we make this ecosystem stronger - it is something that the government needs to look at," he said.
Hartalega, which is the world's largest producer of nitrile gloves, also estimated Chinese manufacturers to capture 16 % of the global supply in 2021, while Malaysia still dominate with 67 % share. The company expects Chinese manufacturers to post 7.0 % growth in their production capacity by 2022.
However, Kuan said there could be a high probability that the plans would unlikely materialise due to the anticipated potential delay. "Similarly, this could happen among the major Malaysian glove manufacturers due to the changing or rather a dynamic market supply and demand," he said, adding that the Covid-restriction could be another element in play that delayed expansion. He cautioned that the expansion plans could also be deterred by the global market's ongoing downtrend of average selling prices (ASPs). "Buyers reduce orders and adjust their inventories. This is because they do not want to carry the high cost of inventories. Given this, the Chinese manufacturers are also slowing down their expansion. This is partly due to Covid-19 restrictions as the constructions are not allowed to resume," he said.
Kuan expects the ASPs to normalise by the first quarter (Q1) of 2022, after declining about 30 % since the company's Q1 ended June 30, 2021. "We expect the ASP to not go as low as the pre-pandemic level. We think the reasonable price would be above US$30 per thousand because if the ASP is below that, it will be a very low margin," he said. Hartalega's focus, he said, was to build new factories, accelerate the automation and digitalisation implementation, while focusing more on research and development (R&D). "We have developed auto-packing and quality control machines as well as automated or digitalised our manufacturing processes. This will collectively reduce our headcount by 17 % to 20 % from our total workforce of 9,100. We aim to achieve within three years," he added.
Hartalega is building four new plants at its existing manufacturing facility in Sepang, Selangor, after earmarking RM1.5 billion in capital expenditure to add 19 billion pieces of gloves on top of the current 44 billion pieces per annum. For the next three years, Hartalega said it would also allocate about RM1.3 billion for the new construction of the factory, automation and digitalisation and building more R&D facilities.
Source: Daily “The New Straits Times”, Kuala Lumpur; 7 Sept 2021
(Syed Rashid Ali, Karachi, Pakistan)