Guys, let me share some info on glove outlook for your reading pleasure.

First of all, do you know that tens of millions of filthy, used medical gloves are illegally imported into the US? Can you imagine the used gloves are being washed, dried, re-packed for the usage of frontline healthcare personnel, doctors, patients, industrial and food handling purposes, as well as general public like you and me? (Can’t imagine other PPEs like face masks are being recycled…)

And why is this happening? Simply because there is no way to solve the global shortage which will take years to ease – governments and hospital systems all over the world have been scrambled to secure sufficient stocks in-need on time, especially triggered by the COVID-19 outbreak from pandemic to endemic. Most hospitals were left struggling with gloves shortage rather than protective gowns and face masks.

The shipment volume of illicit trade on substandard or fraudulent gloves to US is enormous and believed to be amounted to billions of dollars. Here’s a quite detailed news reported by CNN if you would like to have further insights: https://edition.cnn.com/2021/10/24/health/medical-gloves-us-thailand-investigation-cmd-intl/index.html

Now, as the demand on gloves shot through the roof in early 2020 gradually normalised and a slew of companies announced their new ventures into gloves manufacturing since mid-2020, the question worth wondering is, how will the seesaw of supply and demand work going forward?

According to the Margma (Malaysian Rubber Glove Manufacturers Association), demand will continue to outstrip supply (as many of you may have heard of this). From 2020 to 2023, there is higher demand and supply expected yet the gap remains unmatched globally. Yes, the urgency of demand has slowed down from the peak pandemic time, yet demand will sustain beyond 1Q 2022 with growth rate averaging between 15-20% per annum compared to pre-COVID of 8-10%.

This is driven by better healthcare and hygiene awareness especially from emerging economies that increase the glove usage per capita as well as wider applications by unconventional consumers for stricter safety practices, like people in airlines, hospitality, retailing, food processing and services, household, electronics clean room, janitorial or mechanical, tattooing procedures, other than the common ones from medical and dental, pharmaceutical and laboratory lines.

From supply side, The Edge Markets wrote many new entrants are either still in the midst of setting up their manufacturing facilities or have only recently commenced operations and have yet to see significant contributions for their glove diversifications as of October 2021. Among those who have seen positive contributions are either opted to acquire an existing glove maker or added a glove trading business, the only name mentioned for whom has commissioned its own dipping lines is AT Systematization.

Understood that this is leveraging on the advantageous background of AT Systematization in designing and manufacturing of industrial automation systems and precision engineering solutions which requires relatively higher technical expertise compared to other manufacturing activities.

Talking back about the basic law of supply and demand, if the industry players are aware of the oversupply concerns, then they will tend to adopt a more prudent and disciplined approach on production capacity expansion which is unlikely to lead to oversupply. Judging from the balancing acts taken by big glove manufacturers in scaling down or deferring their expansion plans and new entrants may take a step back or not as aggressive as then, the forecasted newly added annual capacity for gloves may not be materialised eventually. Hence, the total market capacity may not be able to meet the post pandemic demand growth of 15% per annum moving into 2022.

Also touching on raw material cost, research analysts pointed out that lower latex and nitrile costs (though higher gas cost) have helped cushioning lower ASP. The trend will continue in near term as both input cost and output price normalise following the efficient and efficacious vaccination programme rolling out globally. Good news for local players is that less competition from China is perceived as the operating environment getting tougher for them with lower ASP and the scarcity of power supply as winter approach.

All in all, noted that major glove players in Malaysia are still upbeat of the industry prospects underpinned by sustainable and structural demand growth, resulting from heightened healthcare standards and hygiene awareness among medical and non-medical users, not forgetting about the space left by second-handed glove scam as well as import ban by US CBP due to forced labour allegations. M&A might appear as good opportunity for big players and successful new joiners who move fast enough to enjoy the ride.

The glove counters recently also regained buying interest following the resurgence of Covid-19 cases across Europe. Bargain hunting sparked as share prices of glove makers have fallen significantly so far this year.

It is time to revisit.

Data for reference

Big 4 share prices start to rebound from trough, in line with the COVID-19 infection rates in the 2 largest economies

https://covid19.who.int/

https://graphics.reuters.com/world-coronavirus-tracker-and-maps/