Gloves Industry: Malaysia, hand-in-glove with the rubber glove market

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Though competition is tight in the gloves industry, according to Malaysia’s industry players, nobody is backing down from meeting the rising global demand for gloves, says Angelica Buan in this report.

The demand for rubber gloves is growing globally due to the advancement in technological applications and the emergence of various diseases. Global demand for rubber gloves is forecast to expand 3.9% a year between 2016 and 2020. Currently, rubber surgical gloves account for 21.8% of the global demand while other rubber gloves have a 78.2% share of the market, according to Global Research and Development Services (GRDS).

Globally, Malaysia, along with Thailand, the US, the Middle East, and Asia Pacific has dominated the global rubber gloves market.

A leading rubber glove producer, Malaysia has secured its spot in the world market, being home to four top glove players, including Top Glove, Hartalega, Kossan Rubber, and Supermax, and to date, is already exporting gloves to over 195 countries worldwide.

Malaysia remains the world’s leading supplier of medical gloves (examination and surgical gloves), supplying more than 50% of the global demand, according to the Malaysian Rubber Export Promotion Council (MREPC). Its data showed that in 2018, Malaysia exported RM16.2 billion worth of gloves and RM1.6 billion worth of surgical gloves.

The Malaysian Rubber Glove Manufacturers Association (MARGMA), an organisation that represents 90% of local glove manufacturers, has forecast that Malaysia will further move up to the global value chain. Its global market share of gloves is anticipated to rise to 68% from 2020. Yearly, the glove industry is anticipated to break in a 15% growth rate.

“Dyed in the wool” strategies to maintain competitive edge

A better business climate can further support the industry, according to MARGMA. In a string of efforts to foster the glove industry’s growth, the Selangorbased organisation has urged utilities firms to reduce their tariff rates as per the price roll in liquefied natural gas (LNG) and coal prices in the international market in the recent months.

Addressing the country’s natural gas concessionaire, Gas Malaysia Bhd, and electric company, Tenaga Nasional Bhd, Denis Low Jau Foo, MARGMA’s President, said that adjusting the LNG and electricity prices can help local rubber glove makers cope. The highly competitive business environment has come about as a result of rising costs due to higher wages, higher natural gas prices and higher electricity tariffs for businesses.

MARGMA has also sought the cooperation of the Energy Commission in moderating energy costs to make the Malaysian rubber glove industry more competitive in the world market.

This, Denis said, was to ensure that Malaysia continues to be the global leader in the supply of medical examination and surgical gloves to the world. This year, the organisation expects its members to export RM19.9 billion worth of gloves, about RM2 billion more from the previous year’s total.

Earlier on, the Malaysian rubber glove industry called for an extension and expansion of the reinvestment allowance (RA), which it included in its 2019 budget proposal. The rubber glove industry, considered a matured industry, is no longer granted an RA.

The increase in the world standard of healthcare and the ageing world population are driving the gloves demand, according to Malaysian Investment Development Authority (MIDA) in its report. This is also spurring the glove industry, particularly the medical segment, to become more competitive.

In the current state that the manufacturing sector is committing to the Industry 4.0 policy, MARGMA and MIDA have reasoned that the RA enables Malaysian glove manufacturers to expand and build modern and automated facilities, to counter rising labour costs and to increase production efficiency.

Industry players expand, diversify amid business challenges

Top glove makers are setting their sights on greater goals in the coming years. Shah Alam-headquartered Top Glove Corporation considers itself performing well beyond its targets. Starting as a 100-employee local business in 1991 with a single factory and one production line, the world’s largest gloves manufacturer has grown with 40 factories, 648 production lines and a capacity of 60.5 billion pieces of gloves/year. By 2020, the company aims to corner 30% of the global market and to ultimately become a Fortune Global 500 company by 2040, according to its Founder/Executive Chair, Tan Sri Dr Lim Wee Chai.

The company reported a positive performance for the second quarter of 2019, “despite an increasingly challenging and competitive business environment,” Lim said.

During the first quarter, Top Glove posted a sales revenue increase of 27.7% to RM2.42 billion, compared to the same period a year ago; and which at the half year mark, already represents 57.5% of the total sales revenue for that year. The second quarter of 2019 also noted a 21% increase to RM1.16 billion of sales compared to last year’s, topping the projected global demand of 10% with a volume growth of 16%.

Top Glove is also expanding its operations to meet the growing glove demand globally. In progress is the expansion of several existing facilities, including, F32 (Phase 1 & 2 to commence operations by the second and the third quarter of 2019, respectively); F33, a new block to be operational by the second quarter of the year; refurbishment of F2B, and a new block, F5A, both of which are starting up by the fourth quarter.

By 2020, Top Glove expects new facilities to start up: new facilities, F40 and F42, (1st phase) in Malaysia will be operational by the first and the fourth quarter, respectively; F41 in Vietnam and F8A in Thailand will be operational by the second and the third quarter.

These are expected to boost the group’s total number of production lines by an additional 200 lines and production capacity by 20.4 billion gloves/ year. By the end of 2020, Top Glove will have a total of 848 production lines and a production capacity of 80.9 billion gloves/year.

Not resting on its laurels, Top Glove, will soon diversify to manufacturing medical catheters, in addition to its condom brand launched last year.

Meanwhile, the company is also intending to set up a factory in Turkey, which it said is the fourth largest importer of gloves along with the US, Japan and Brazil. The country gets 70% of its demand from Top Glove.

Selangor-headquartered Kossan Rubber Industries may have started the year with marginal pressure as it shifted its product mix further towards nitrile with a nitrile-to-natural rubber split of 75:25 (70:30 previously). The pressure is said to be a result of increased competition in the area of nitrile as other rubber glove producers increase their nitrile glove capacity. Nonetheless, it boasts an uptrend in revenue. In 2018, it posted RM2.14 billion in revenues, up from RM1.96 billion the previous year.

The company is also anticipating expansion of capacities. Kossan’s Plant 18, which has the capacity to churn out 2.5 billion pieces of gloves is expected to be commissioned by the second quarter of 2019, while Plant 19, with a capacity of 3 billion pieces, is starting up in the last quarter of the year. Kossan’s total production capacity is expected to reach 32 billion pieces/year from the current 26.5 billion pieces.

By 2020, Kossan’s integrated RM1.5 billion plant in Bidor, Perak, will start construction and is anticipated to be completed in eight years, following the acquisition of the RM82.4 million plot in March last year from the Perak State Development Corporation.

Supermax, which currently exports to over 160 countries worldwide in the US, Europe, Middle East, Asia and the South Pacific, produces up to 24 billion pieces of gloves/year, and accounts for about 12% of the global demand for latex examination gloves.

The company has 11 manufacturing plants based in Malaysia. Citing a 10.2% growth due to the commissioning of new capacity in the second quarter of 2018, further revenue growth of between 3% to 5% of 1.35 billion gloves is anticipated from the rebuilt plant in Perak, which was only fully operational by end-September 2018.

Supermax eyes an overall capacity target of 29 billion pieces/year in mid-2020 from the current 24 billion pieces.

The company, which also diversified into the contact lens business, expects the venture to break even by 2022. Supermax shipped the first batch of contact lenses to Japan last year after its much awaited procurement of licence in the country.

It also launched its Aveo contact lens in Malaysia, which is now being exported to other countries. The company, through its subsidiary Supermax International, holds a majority stake in Malaysia’s local contact lens maker SuperVision Optimax.

Aiming to be a leading glove company, Hartalega Malaysia is the world’s largest nitrile glove producer. It is also advancing its innovation leadership, in view of its new antimicrobial glove (AMG). Hartalega also pioneered the world’s first lightweight nitrile glove in 2005.

The AMG was developed in collaboration with R&D company Chemical Intelligence UK and is expected to be launched this May and to account for 10% of Hartalega’s total export volume sales in the first year of its launch. Managing Director Kuan Mun Leong affirmed the challenging business environment due to competition and increasing manufacturing costs. Nevertheless, the company is said to be pushing its expansion plans to raise its capacity.

Currently, Hartalega is capable of manufacturing 33 billion gloves/year, and progressively expanding to 44.6 billion units by 2020. In the first nine months of 2019, the company posted revenue of RM2.14 billion.

Meanwhile, it is reported to have invested over RM14 million to upgrade its enterprise resource planning system as it complies with its Industry 4.0 agenda.

Thus, Malaysia’s glove manufacturers are expected to expand and build more automated facilities, to stay competitive in the global arena.