KUALA LUMPUR: The demand for medical and surgical rubber gloves picked up final month regardless of the prevailing oversupply state of affairs which is anticipated to be in equilibrium by 2025.
Malaysia Rubber Glove Association’s former president Denis Low Jau Foo instructed eNM not too long ago that the uptick in demand was attributable to prospects replenishing their inventory.
“There was aggressive shopping for through the Covid-19 pandemic, these shares are going through expiry. Medical gloves have a shelf life,” Low stated.
It is that this replenishment issue that’s pushing up demand, Low stated.
With demand on an uptrend, prices are additionally set to rise.
“We are seeing a major enhance in latex worth by as a lot as 28.7%. This means a better price for glove producers and this shall be handed on to the consumers,” Low stated.
Rubber glove producers are the most important customers of bulk latex, consuming near 460,000 tonnes each year, he stated.
Weather circumstances akin to El Nino and La Nina are additionally instrumental within the worth rise and rubber worth volatility. Stability is feasible from June onwards, Low stated.
While the uptick in demand is nice information for the sector, many glove makers have “switched off manufacturing” due to the oversupply state of affairs just a few years in the past.
“The glove business is now working at 50% capability. It is simple to modify off manufacturing. To restart it wants collaborative motion by all gamers.
“The authorities additionally has to make sure employees’ return, supplies and logistics. All these elements have to work in tandem,” Low stated.
Malaysia produced as much as 230 billion items of gloves on the top of the pandemic and prices soared to loopy ranges, Low stated.
Between 2020 and early 2022, prices reached US$120 to US$140 per 1,000 items versus US$18 and US$20 (RM85 and RM95) per 1,000 items right now.
“The lowest was US$14 for 1,000 items earlier this yr in China,” he stated, including that the state of affairs within the sector shall be extra steady in just a few months.
Low’s views are consistent with RHB Investment Bank’s outlook on the sector.
The analysis home stated gross sales are anticipated to choose up by the second half of 2024 given extra balanced demand-supply dynamics, resulting in improved profitability.
RHB Investment Bank is obese on the sector. It sees the business’s “extra capability regularly phasing out”.
It ought to obtain demand-supply equilibrium by the tip of 2024/2025, it stated.
It additionally expects worth competitors from Chinese friends to regularly subside, attributable to rising high quality issues with “greater rejection charges from the US, and as Chinese gamers’ pivot in the direction of sustainability”.
Kenanga Research reiterates that the present difficult and aggressive panorama will persist all through 2024. While some gamers have returned to the black, the tepid profitability doesn’t assist lofty valuations, it stated.
“The business will proceed to face large oversupply, predatory pricing by sure abroad gamers, weak demand and excessive price of inputs akin to nitrile butadiene rubber and latex. Nitrile butadiene rubber prices have moved up because the fourth quarter of 2023,” the analysis home stated.
On a barely brighter be aware, it stated additional decommissioning of older manufacturing services domestically ought to assist to ease provide stress.
As for the value of latex, Kenanga expects the value to rise attributable to low manufacturing through the “wintering months between December and May”.
Year-to-date, prices have risen by 8% with consumers strolling away each time there may be an try to boost prices, Kenanga stated.
“Chinese producers are nonetheless promoting at US$16−US$18 per 1,000 items, which implies any try by Malaysian producers to boost prices is more likely to end in dropping market share,” Kenanga stated. – eNM
