Rubber gloves to see slower results in subsequent quarters
KUALA LUMPUR: The rubber gloves sector will likely record a slower set of results in subsequent quarters, analysts project, despite the fact that demand for gloves is still intact over the next few years.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), tell-tale signs like normalising demand and intensified competition are pointing towards a potentially slower set of results in subsequent quarters.
“Anecdotal evidence suggests that shorter delivery lead time does indicate that strong demand is tapering off and players ramping up production could result in further average selling price (ASP) pressure,” Kenanga Research said.
From its channel checks, the research arm gathered that competition in nitrile gloves has intensified, leading to pressures on ASPs.
“As such, coupled with the moderating demand and in anticipation of new capacities ramp-ups, we would not be surprised if ASPs come under further pressure over the next two quarters.
“We understand that over the past six months, delivery lead times (the time frame between order and delivery) have shortened from 60 to 70 days to 30 to 45 days, potentially indicating that strong demand is tapering off.”
That said, Kenanga Research saw that demand for gloves is still intact, with Malaysia gloves exports for the first nine months of 2018 (9M18) having recorded 12 per cent year on year (y-o-y) growth.
“We believe that the average eight to 10 per cent demand per annum for rubber gloves over the next few years is still intact.
“In 9M18, the total exports of rubber gloves, synthetic rubber (SR) and latex-based natural rubber (NR) combined rose 12 per cent y-o-y to 60.5 billion pairs and 15 per cent to in value.
“Specifically, Malaysia’s exports of SR and latex gloves rose 16.7 per cent and 5.1 per cent y-o-y, respectively, in 9M18.”
The research arm further noted that the Malaysian Rubber Glove industry marked a milestone in 2018 where for the first-time SR gloves has completely overtaken NR gloves in terms of market share.
“This was evident from the lower NR to SR sales volume ratio of 37:63 in 9M18. The demand and strong double-digit growth rate of gloves are expected to continue to be driven by nitrile gloves.
“We also expect latex-based gloves to continue to register positive volume sales as well due to the stable latex price. Growth will be supported by higher health standards and expanding use of rubber gloves.”