Rising cost weighs on rubber glove makers

Stronger ringgit also affecting them

PETALING JAYA: Share prices of rubber glove makers are under pressure on concerns over rising production cost, while the stronger ringgit erodes their export advantage.

The price of butadine, a core material in the production of nitrile latex, has spiked by 60% in the past two months after a disruption in production due to Hurricane Irma in the US.

The highly-volatile prices of latex were also pushed up due to speculation, ahead of the International Tripartite Rubber Council meeting, which took place in Bangkok last week.

Latex prices have risen 19% in the past two months due to weather conditions and higher demand, while nitrile rubber prices increased 5% during the period, and are expected to continue the uptrend.

Last week, Maybank Investment Bank Research said share prices of rubber glove stocks under its universe had fallen between 2% and 7% in one week.

It noted that some players had already raised their average selling prices (ASPs) by 3% between August and September 2017 to reflect the higher raw material costs.

However, it said, margins may still be affected initially due to the timing difference between the raw material inventory period and the final product billing date.

“Given the mild supply shortage of rubber gloves, we think glove players will be able to adjust their ASPs promptly in order to keep their margins intact,” it said in a note.

It has a “buy” on Top Glove Corp Bhd and maintained its “hold” call on Hartalega Holdings Bhd and Kossan Rubber Industries Bhd.

Shares in Top Glove fell 8 sen or 1.45% yesterday to close at RM5.45 while Supermax declined four sen to RM1.77. Kossan Rubber was down 18 sen, or 2.65% to RM6.60, its lowest since July 7.

Hartalega Holdings Bhd, however, gained three sen to RM6.52. The counter has gained about 35% so far this year.

At 5pm, the ringgit was quoted at 4.1885 against the US dollar.