HLIB RESEARCH: ‘OVERWEIGHT’ CALL STAYS
Resurgence of Covid-19 cases seen providing short-term surge in demand
THE Malaysian Rubber Glove Manufacturing Association (Margma) estimated that the global disposable glove supply will increase by 22 per cent to 420 billion pieces this year, said Hong Leong Investment Bank Bhd (HLIB) Research.
It said the association revealed that the figure was based on data from its members in Malaysia, new entrants into the market, information from the Asean rubber glove manufacturing association, as well as tracking the capacity expansion in other countries.
Margma said it remained sceptical of the mooted 85 billion to 100 billion pieces production capacity increase from China by 2023.
Furthermore, HLIB Research said Margma reckoned that even if rapid capacity expansion in China materialised, the increased supply would be moped up by China’s domestic market due to heightened hygiene awareness from the Covid-19 pandemic.
“We noted that pre-pandemic (2019), China’s annual glove use per capita of six pieces lagged far behind its developed market peers (150/100 pieces in United States/European Union per capita).”
HLIB Research said Margma had expected the average selling price to be 40 to 60 per cent higher than pre-pandemic levels.
“In the post-pandemic landscape, Margma expects it to result in a new normal of increased hygiene awareness around the world and higher glove use in general.
“Margma compared Covid-19 to the AIDS epidemic in the 1980s, when glove use accelerated, particularly by healthcare workers, in order to avoid direct contact with open wounds,” it said.
Margma believed that there had yet to be a single new glove producer in Malaysia that had begun production despite the pandemic lasting for over a year.
“While we understand that a number of new Malaysian entrants are expected to begin production from next month,
Margma shared that receiving various certifications would take one to two months.
“Margma has estimated that new Malaysian entrants will add between 6.5 billion and 10 billion pieces to the production capacity per annum this year,” it said.
HLIB Research has maintained its “overweight” call on the sector with Top Glove Corporation Bhd being its top pick.
“Despite the recent correction in prices, we expect the resurgence of Covid-19 cases globally (since mid-February) to provide support for sales demand in the short term,” it said.