Glovemakers will continue to gain traction in 2025
07 Jan 2025
The rubber gloves sector is expected to continue to gain traction in 2025, supported by continuous earning recovery, higher volume sales, improving supply-demand dynamics and potential increases in average selling prices (ASPs).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the stage is set for the rubber gloves sector to see strong earnings recovery in the coming year as there are indications pointing towards a strong demand recovery supported by inventory rebuilding from distributors and faster-than-expected industry consolidation.
“Specifically, there has been an uptick in orders over the past three quarters. The rise in demand comes as the inventories of major distributors across all regions have returned to normal levels,” said the research arm in an analysis.
They pointed out that Hartalega Holdings Bhd (Hartalega) for one is about to set to see their sales volume increase to 2.5 billion pieces per month in the second half of its financial year 2025 (2H25) while Top Glove Corporation Bhd (Top Glove) has continued to see a 10 to 20 per cent month on month (m-o-m) uptrend in its sales volume since Nov 2024 and is expecting to see replenishment activity pick up in subsequent quarters.
The oversupply issue is also expected to be less acute in 2025 as the research arm notes that players have been actively culling production capacity via the decommissioning of selective plants and the exit of new entrants.
“Based on our estimates, the demand-supply situation will only start to head towards equilibrium in 2026 when there is virtually no more net new capacity coming on stream while the global demand for gloves continues to rise by 15 per cent per annum underpinned by rising hygiene awareness,” they opined.
Moreover, the US imposition of tariff ratchets up to 50 per cent in 2025 and 100 per cent in 2026 for Chinese origin gloves will make Malaysian glove makers the prime beneficiaries as US customers look for alternative sources due to the resulting increased ASPs of Chinese origin gloves.
“If we assume a base case ASP of US$19 per 1,000 pieces for Chinese gloves, a 50 per cent tariff hike is expected to raise Chinese glove producers’ ASP to US$25 per 1,000 pieces.
“This compares with Malaysian players’ ASPs which currently sit at US$18 to 21 per 1,000 pieces, and we expect Malaysian glove makers to benefit from the US import tariff hike from 7.5 per cent to 50 per cent on Chinese glove imports in 2025,” the research arm reasoned.
That said, there are concerns that Chinese players will begin to flood other markets in order to offload their stock which may result in mixed effects for local players.
However, Kenanga Research believes that the net effect of the US tariffs will be positive for local players as any volume loss in non-US markets will be able to be offset by higher demand from the US as the US historically accounts for 35 to 40 per cent of Malaysia’s total glove volume.
“We believe that given the current geopolitical tensions between the US and China, and the tariff hike, American buyers are less likely to source most of their supplies from China. As a result, buyers are diversifying their sources, opting to purchase from other countries including Malaysia,” they mused.
“Some buyers have already begun shi ing their purchases to Malaysia as a risk management strategy, which could potentially benefit Malaysian players including Hartalega, Kossan Rubber Industries Bhd (Kossan), Top Glove, and Supermax Corporation Bhd (Supermax),” they added.
Overall, the uptick in demand for rubber gloves is expected to cause local ASPs to inch up gradually, potentially reaching US$20 to US$22 per 1,000 pieces in 2025.
This uptick in demand has prompted local rubber glove players to forecast that ASPs may inch up gradually by US$1.00 and potentially reach US$20 to US$22 per 1,000 pcs in 2025.
In contrast, Kenanga Research’s 2025 ASP assumption is slightly more moderate at US$20 to US$21 per 1,000 pcs.
Overall, Kenanga Research maintains and ‘overweight’ call on the rubber glove sector with their top picks being Hartalega and Kossan due to their more sizeable US sales exposures.
Source: The Borneo Post
