The Borneo Post (Sarawak)

Muted outlook ahead for rubber gloves — Analysts

KUCHING: Analysts from Public Investment Bank Bhd (PublicInve­st Research) believes that the local glove sector will have a muted outlook ahead as it remains under pressure from persistent oversupply, cautious customer sentiment, and pricing competitio­n.

They guided that this view is supported on the latest quarter results from glove players under their coverage which reflect a sequential decline in sales volumes.

These sequential decline in sales caused the group’s utilisatio­n rates to also decline and hover below 70 per cent levels.

“This is mainly due to earlier frontloadi­ng activities by US customers and we gather that customers remain cautious, with most adopting a wait-andsee stance, delaying sizeable purchases amid uncertaint­y from changes in tariff policy,” PublicInve­st Research opined.

Based on the analyst’s channel checks, these frontloade­d inventorie­s are expected to sustain for another two to three months which indicate that order replenishm­ent would likely not pick up until August to September, 2025.

For non-US customers however, PublicInve­st Research highlights that Chinese players after losing market share in the US market have been aggressive­ly increasing their market share in the non-US market, especially the EU.

Some Chinese players have begun pricing as low as circa US$14 to 15 peer 1k pcs and besides just low prices, players have also been seen to be expanding capacity in order to retain global competitiv­eness.

“Notably, Intco has increased its total installed capacity by 16 per cent year on year (y-o-y) to 87 billion pieces per annum, despite the prevailing oversupply and challengin­g market environmen­t.

“The expansion includes nitrile gloves by 24.4 per cent y-o-y to 56 bilion pieces and PVC gloves by +3.3 per cent y-o-y to 31 billion pieces. Additional­ly, the Group is reportedly operating at maximum capacity,” the analyst shared.

Meanwhile, price competitiv­eness remains a key headwind even with US customers as the tariff adjustment which widened the average selling price (ASP) gap between China and Malaysia may not materialis­e as the recent invocation of emergency powers has prevented US President Donald Trump from enacting broader tariff hikes.

To recap, under the previously assumed 80 per cent tariff, the ASP gap between Chinese and Malaysian gloves would have been US$27 per 1k pieces versus US$20 per 1k pieces, making Chinese gloves uncompetit­ive in the US market.

But assuming a more conservati­ve scenario where China faces only a 10 per cent reciprocal tariff, China’s ASP will likely come down to circa US$24 per 1k pieces.

“Additional­ly, Chinese producers may absorb part of the tariff cost to defend market share. This will likely keep global ASPs subdued and limit near-term recovery for Malaysian glove makers,” PublicInve­st Research added.

In light of these ongoing headwinds and muted outlook, the analyst has decided to downgrade their previous ‘overweight; call on the rubber glove sector to ‘neutral’. — Bernama