Following the International Rubber Glove Conference and Exhibition (IRGCE 2014) organised by the Malaysian Rubber Glove Manufacturers Association (MARGMA), analysts have learnt that the Malaysian rubber glove industry may be constrained by capacity limitations at packaging companies.
According to AmResearch Sdn Bhd (AmResearch), the biennial exhibition, which is on its seventh edition this year, presents a platform for the rubber glove industry players and experts to interact and network with one another, and be updated on the latest developments (such as technology and regulations).
“From our discussions with the nitrile producers, we understand that butadiene, a key component, is under pricing pressure due to an oversupply situation,” the research house highlighted.
It noted that this had resulted in low nitrile prices of late (about US$1,000 per tonne) while natural rubber prices have also been trending downwards, closing at RM4.09 per kilogramme (kg) late last week.
While low raw material prices are a boon to the rubber glove manufacturers given that it consists of about 50 per cent of their production costs, AmResearch further noted that the manufacturers would likely pass on the savings to their customers through lower average selling price (ASP).
It observed that this puts pressure on their sales volumes which will need to grow at a much higher rate to maintain a decent topline growth.
“Further down the production line, we learnt that the Malaysian rubber glove industry may be constrained by capacity limitations at packaging companies.
“The rapid capacity expansions by the rubber glove players over the past two years have not been matched by that of the packaging companies,” the research house pointed out, adding that this may result in slower sales.
With regard to the Ebola outbreak, AmResearch gathered that there has not been any significant uptick in demand although the need for personal protective equipment (PPE) has been highlighted by healthcare workers.
It projected that glove consumption is expected to rise by the usual eight per cent to 10 per cent per annum.
“That said, we are still hopeful for higher demand from Africa which has a relatively low glove usage, as World Health Organisation (WHO) has anticipated that it will take six to nine months to stop the ongoing spread of Ebola,” it opined.
All in, AmResearch maintained ‘neutral’ on the rubber gloves sector with no change to its earnings forecasts and recommendations at this juncture.
Read more: http://www.theborneopost.com/2014/09/08/rubber-glove-players-wary-of-capacity-limitations/#ixzz3DMjTFMOU