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Demand for rubber gloves will continue to grow; yet changing market needs may test the resiliency of the world’s largest rubber gloves producer, Malaysia, to remain in the lead, says Angelica Buan in this report.
The global rubber glove market has been dominated by Malaysia, which accounts for more than half of the total global market share. It is the production nest for large glove makers the likes of Kossan, Hartalgea, Supermax, Top Glove, and Latexx Partners. The Southeast Asian country is also the third largest producer of natural rubber, which, in terms of raw materials alone, is already an edge over other rubber glove sources elsewhere in the world.
However, the changing consumer needs, could rouse Malaysia from its laurels.
A recent study by India-headquartered Koncept Analytics (KA) on the global rubber gloves market indicates that while Malaysia remains the largest latex gloves producer, the growing demand for synthetic rubber (nitrile) gloves is eating into the demand for latex gloves.
The report finds that heightened caution against latex allergies, are prompting innovation and technologies to create synthetic products that match the tactile sensitivity and low cost of latex gloves. Latex-free gloves are also finding more users in healthcare facilities. Nitrile gloves have undergone major improvements, being available in powdered or non-powdered forms, for example. A growing preference for nitrile rubber gloves can also be found in the medical and industrial sectors.
Left high and dry with GSP cancellation
The volatility of the price of raw materials, labour shortages, changing wage policies and currency fluctuations are also affecting the competitiveness of Malaysian rubber gloves, according to KA’s report.
Meanwhile, Stanley Thai, Executive Chairman/ Group Managing Director of Supermax has been quoted as saying that a cost hike in rubber gloves is linked to the 16% increase in electricity tariffs imposed recently, the high wages and cancellation of the General System Preference (GSP).
The GSP is a system where developed countries grant preferential treatment to eligible products imported from developing countries and it included Malaysia. In 2012, the European Union revised the GSP and listed Malaysia as an upper middle income economy, based on World Bank data on the country’s Gross National Income. The new GSP was enforced in January this year, thus cancelling Malaysia’s GSP benefits.
Local glove makers, however, are quick to deny reports that there is a price war waging within the industry.
The Malaysian Rubber Glove Manufacturers Association (Margma) has given assurances that there is a fixed pricing mechanism followed by industry players. However, this mechanism also prevents producers from pulling up margins to stay competitive globally.
In effect, the industry has to contend with the challenging bottlenecks of costs and material uncertainties. Capacity limitations at packaging companies also stifle output expansions of rubber gloves, ergo, slowing down sales.
Revving up demand
There will be greater demand for rubber gloves, since they are essential in the healthcare sector, as a first-line defence against infections, more so than in other sectors. Increasing healthcare awareness will support demand for rubber gloves, according to Lim Kwee Shyan, President of the Margma, which expects demand from this segment to grow 8% this year to 178.6 billion pieces. Exports for the first-half of the year have already reached RM6 billion, said Lim.
Meanwhile, Thailand-based Safeskin Medical and Scientific (a unit of Texas-based Kimberly Clarke) will be leaving behind opportunities for Malaysian glove makers, when it finally closes one of its rubber factories that has an output of 3.2 billion pieces/year.
Emerging diseases will also spur demand. A report by the Hong Leong Investment Bank indicates that the current Ebola virus outbreak in Africa, which has already spurred a death toll count of more than 2,600, as of this writing; as well as stockpiling efforts from other countries to contain infections or as means of prevention, has generated demand and increase in the share prices of public-listed glove manufacturers.
As for the Ebola epidemic, Malaysia has donated more than US$2 million worth of rubber gloves that came in 11 containers, each holding 1.9 million pieces, to Africa. The countries receiving the gloves included Liberia, where health workers had to resort to wearing plastic grocery bags due to the lack of gloves; Sierra Leone, Guinea, Nigeria and Congo.
Among the companies that participated in the relief efforts were Top Glove, multinational conglomerate Sime Darby, plantation company Kuala Lumpur Kepong and oleochemicals and properties company IOI Corp.
Call for a new strategy
At the International Rubber Glove Conference and Exhibition (IRGCE) held in Kuala Lumpur, Malaysia, in early September, Malaysia’s Deputy Prime Minister Tan Sri Muhyiddin Yassin said that revisiting business models to reap advantages from the growing global market for gloves, is a strategic move for the local glove producers.
He said that the government will continue to support the sector with various incentives. Assistance has been identified and disbursed to the local rubber glove industry in helping develop an efficient eco-system, he said in his keynote address during the event.
Meanwhile, Supermax’s strategy is to expand its markets. By next year, it is expanding its Asian exports by pumping up distribution of its products in India, China and Japan, the latter being targeted as a key market.
Asia only accounts for 6% of Supermax’s total exports. Most of its glove products are marketed to western countries. The firm also plans to set up a European headquarters in London next year, to man the marketing and distribution activities in the region.
Supermax, which produces nitrile and rubber latex gloves, will also be ramping up its nitrile glove production. New lines at its plants in Meru, Klang, will be doubling its yearly nitrile glove production from 5.4 billion pieces to 12.3 billion pieces, thus increasing its nitrile production to 53% and the latex decreasing to 47%.
On the other hand, Top Glove, invested RM22 million two years ago to acquire a 95% stake in PT Agro Pratama Sejahtera for a 60-year concession to plant rubber trees on 30,773 ha of land in Sumatra, to secure latex supply and buffer the company against price volatility. However, Indonesian lawmakers are mulling restriction of foreign ownerships in plantation to not more than 30% from the current 95%.
Due to this latest development, Top Glove is considering reducing its stake in the green field rubber estate. In the process, Top Glove is seeking to tie-up with local Indonesian partners to oversee the local operations.
Ups and downs of the glove industry
Whether it is in a winning or losing position, the overall performance of the Malaysian gloves industry remains on the uptrend, according to industry experts.
Muhyiddin said that in the previous year, Malaysia exported RM10.5 billion worth of rubber gloves; the total export earnings of the industry climbed 282% from RM3.33 billion in year 2012. To date, rubber glove exports from Malaysia stands at nearly 80% of the total export earnings of the rubber products sector, he added.
The gloves are being exported to more than 190 countries, and the current total global export is valued at US$6.2 billion. Moreover, the continuous robust business for the local gloves industry enables it to provide employment to more than 41,000 workers, Muhyiddin said in his address during IRGCE.
Lim of Margma also noted during the IRGCE event that the association is projecting demand for rubber gloves to exceed 300 billion pieces in less than ten years or before 2020. At the same time, he also cautioned that the increasing demand, as well as available supply for nitrile gloves, will weigh down on the profit margins of latex gloves producers.