KUALA LUMPUR – The challenging and competitive business landscape in the glove sector is projected to persist throughout 2023, and players are expected to incur losses moving into the second quarter of the year due to elevated costs of raw material, energy, and labour, said Kenanga Research.
The research firm noted that the average selling price (ASP) for gloves remained subdued at US$19 to US$21 (US$1=RM4.40) per 1,000 pieces versus the cost of US$21to US$23/1,000 pieces, and that massive capacity has led to suppressed industry utilisation rate, averaging at 35% to 40%.
It said that some players are hopeful that the rate of decline in the ASP is slowing, while others believe that selling prices have bottomed.
“Hopeful that selling prices have bottomed out, certain players will attempt to raise prices from end-March 2023 by an average of 5.0% to 10%, from ASP of US$19-21 to US$20-22 for the March to April shipments.
“But we are uncertain if this is viable as Chinese players are selling at US$17 per 1,000 pieces,” it said in a note today, adding that raising the ASP also looks to be challenging due to the current massive overcapacity situation.
It noted that the Malaysian Rubber Glove Manufacturers Association (Margma) has projected a 12% to 15% growth in the global demand for rubber gloves annually from 2023, following an estimated 19% contraction to 399 billion pieces in 2022.
“It believes the supply-demand equilibrium may return in six to nine months. However, we beg to differ, as we expect the overcapacity situation to persist for at least the next two years.
“Based on our estimates, the demand-supply situation will only start to head towards equilibrium in 2025, when there is virtually no more new capacity coming onstream, while the global demand for gloves continues to rise by 15% per annum, underpinned by rising hygiene awareness,’’ it noted.
The research house projected that the demand for gloves would rise by 15% this year, consistent with Margma’s forecast, but opined that this will do little to ease the overcapacity situation.
It reckons that the global glove production capacity will grow by another 16% cent to 595 billion pieces during the year, as more capacity planned by incumbent and new players during the pandemic years – enticed by super-fat margins that had evaporated – finally come on line.
“This will result in the excess capacity rising by 22% to 137 billion pieces from 112 billion pieces in 2022.
“The expanded overcapacity means low prices and depressed plant utilisation will likely persist in 2023,’’ it said, thus it has advised investors to avoid the sector for now. – Bernama, April 10, 2023
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