Demand, prices for medical, surgical rubber gloves rising

Stocks bought during Covid-19 pandemic face expiry, pushing up relenishment buying: Expert

KUALA LUMPUR: Demand for medical and surgical rubber gloves picked up last month despite the prevailing oversupply situation which is expected to be in equilibrium by 2025.

Malaysia Rubber Glove Association’s former president Denis Low Jau Foo told Bernama recently that the uptick in demand was due to customers replenishing their stocks.

“There was aggressive buying during the Covid-19 pandemic, those stocks are facing expiry. Medical gloves have a shelf life,” Low said.

It is this replenishment factor that is pushing up demand, Low said.

With demand on an uptrend, prices are also set to rise.

“We are seeing a significant increase in latex price by as much as 28.7%. This means a higher cost for glove manufacturers and this will be passed on to the buyers,” Low said.

Rubber glove manufacturers are the biggest users of bulk latex, consuming close to 460,000 tonnes per annum, he said.

Weather conditions such as El Nino and La Nina are also instrumental in the price rise and rubber price volatility. Stability is possible from June onwards, Low said.

While the uptick in demand is good news for the sector, many glove makers have “switched off production” because of the oversupply situation a few years ago.

“The glove industry is now running at 50% capacity. It is easy to switch off production. To restart it needs collaborative action by all players.

“The government also has to ensure workers’ return, materials and logistics. All these factors need to work in tandem,” Low said.

Malaysia produced up to 230 billion pieces of gloves at the height of the pandemic and prices soared to crazy levels, Low said.

Between 2020 and early 2022, prices reached US$120 to US$140 per 1,000 pieces versus US$18 and US$20 (RM85 and RM95) per 1,000 pieces today.

“The lowest was US$14 for 1,000 pieces earlier this year in China,” he said, adding that the situation in the sector will be more stable in a few months.

Low’s views are in line with RHB Investment Bank’s outlook on the sector.

The research house said sales are expected to pick up by the second half of 2024 given more balanced demand-supply dynamics, leading to improved profitability.

RHB Investment Bank is overweight on the sector. It sees the industry’s “excess capacity gradually phasing out”.

It should achieve demand-supply equilibrium by the end of 2024/2025, it said.

It also expects price competition from Chinese peers to gradually subside, due to rising quality concerns with “higher rejection rates from the US, and as Chinese players’ pivot towards sustainability”.

Kenanga Research reiterates that the current challenging and competitive landscape will persist throughout 2024. While some players have returned to the black, the tepid profitability does not support lofty valuations, it said.

“The industry will continue to face massive oversupply, predatory pricing by certain overseas players, weak demand and high cost of inputs such as nitrile butadiene rubber and latex. Nitrile butadiene rubber prices have moved up since the fourth quarter of 2023,” the research house said.

On a slightly brighter note, it said further decommissioning of older production facilities locally should help to ease supply pressure.

As for the price of latex, Kenanga expects it to rise due to low production during the “wintering months between December and May”.

Year-to-date, prices have risen by 8% with buyers walking away whenever there is an attempt to raise prices, Kenanga said.

“Chinese manufacturers are still selling at US$16¢US$18 per 1,000 pieces, which means any attempt by Malaysian producers to raise prices is likely to result in losing market share,” Kenanga said. – Bernama