RJA October 2014 Gloves Industry

Rubber Journal Asia Gloves Industry

Is Malaysia losing its hold on the glove market?

Demand for rubber gloves will continue to grow;

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 t h a t 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.

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.

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he 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.

Revving up demand here 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,

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Left high and dry with GSP cancellation he 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

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Rubber Journal Asia Gloves Industry which has already spurred a death toll count of more Meru, Klang, will be doubling its yearly nitrile glove than 2,600, as of this writing; as well as stockpiling production from 5.4 billion pieces to 12.3 billion efforts from other countries to contain infections or pieces, thus increasing its nitrile production to 53% as means of prevention, has generated demand and and the latex decreasing to 47%. increase in the share prices of public-listed glove On the other hand, Top Glove, invested RM22 manufacturers. million two years ago As for the Ebola to acquire a 95% stake “…the growing demand for epidemic, Malaysia has in PT Agro Pratama synthetic rubber (nitrile) gloves Sejahtera for a 60-year donated more than US$2 million worth of rubber concession to plant is eating into the demand for gloves that came in 11 rubber trees on 30,773 latex gloves….” containers, each holding 1.9 ha of land in Sumatra, to million pieces, to Africa. secure latex supply and The countries receiving the gloves included Liberia, buffer the company against price volatility. However, where health workers had to resort to wearing plastic Indonesian lawmakers are mulling restriction of grocery bags due to the lack of gloves; Sierra Leone, foreign ownerships in plantation to not more than Guinea, Nigeria and Congo.

30% from the current 95%.

Among the companies that participated in Due to this latest development, Top Glove is the relief efforts were Top Glove, multinational considering reducing its stake in the green field conglomerate Sime Darby, plantation company Kuala rubber estate. In the process, Top Glove is seeking to Lumpur Kepong and oleochemicals and properties tie-up with local Indonesian partners to oversee the company IOI Corp. local operations.

Call for a new strategy Ups and downs of the glove industry t the International Rubber Glove Conference hether it is in a winning or losing position, and Exhibition (IRGCE) held in Kuala Lumpur, the overall performance of the Malaysian Malaysia, in early September, Malaysia’s Deputy gloves industry remains on the uptrend, according to Prime Minister Tan Sri Muhyiddin Yassin said that industry experts. revisiting business models to reap advantages from Muhyiddin said that in the previous year, the growing global market for Malaysia exported RM10.5 gloves, is a strategic move for “…the government will billion worth of rubber gloves; the local glove producers. the total export earnings of the continue to support He said that the government industry climbed 282% from will continue to support the the sector with various RM3.33 billion in year 2012. To sector with various incentives. date, rubber glove exports from incentives…..”

Assistance has been identified Malaysia stands at nearly 80% and disbursed to the local rubber glove industry in of the total export earnings of the rubber products helping develop an efficient eco-system, he said in sector, he added. his keynote address during the event.

The gloves are being exported to more than 190 Meanwhile, Supermax’s strategy is to expand countries, and the current total global export is its markets. By next year, it is expanding its Asian valued at US$6.2 billion. Moreover, the continuous exports by pumping up distribution of its products in robust business for the local gloves industry enables India, China and Japan, the latter being targeted as a it to provide employment to more than 41,000 key market. workers, Muhyiddin said in his address during Asia only accounts for 6% of Supermax’s total IRGCE. exports. Most of its glove products are marketed to Lim of Margma also noted during the IRGCE western countries. The firm also plans to set up a event that the association is projecting demand for European headquarters rubber gloves to exceed “Whether it is in a winning in London next year, to 300 billion pieces in less man the marketing and ten years or before or losing position, the overall than distribution activities in 2020. At the same time, the region. performance of the Malaysian he also cautioned that the Supermax, which increasing demand, as gloves industry remains on the well as available supply produces nitrile and rubber latex gloves, will for nitrile gloves, will uptrend…” also be ramping up its weigh down on the profit nitrile glove production. New lines at its plants in margins of latex gloves producers.

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