RM14b bonanza for M'sian glove makers

Malaysian rubber glove makers are confident of cementing their position as the world’s largest producer, backed by robust growth forecasts of 8% to 10% in volume.

This is expected to generate about RM13 billion to RM14 billion this year.
Most old-fashioned companies have come out of age. Equipped with modern technology they produce about 100 billion superior quality pieces, enabling them to seize nearly 63% of the world’s market share.
Even their closest rivals like Thailand, with a global share of only 16.8%, China (6.7%) and Indonesia (5.1%), may take years to dethrone the highly industrious Malaysian entrepreneurs who sweated for decades to build their empire.
Rising demand for latex gloves from the healthcare sector, food industry, sporadic threat of H7N9 virus in China, steady natural rubber supply plus price and aging population globally, will certainly speed up demand for gloves, said industry experts.
Malaysian Rubber Glove Manufacturers Association said exports could touch RM11.5 billion in 2013, about 9% higher than RM10.56 billion recorded in 2012.
Association president Lim Kwee Shyan said: “Volume wise we will be steadily growing at 8% to 10% next year. We don’t see any hiccup in terms of volume.
“Glove is a very essential product, continuous population growth, healthcare improvements, especially in emerging countries will continue to drive demand for gloves.
“Realistically, we are looking at RM13 to RM14 billion but depending on how price of raw materials move,” Lim told The Malaysian Reserve recently.
The AIDs scare in the 1980s perked up demand for gloves worldwide and farsighted local entrepreneurs exploited the opportunity by taking advantage of Malaysia’s natural rubber supply, low-cost labour then and seaports.
Three decades after, these self-made businessmen, who began early production under zinc-roofed factories with limited technology and product knowledge, matured to become world-class glove makers.
Slowly they also added nitrile or synthetic gloves, which is growing in demand globally, to their production lines.
They transformed smallscale factories into giant public- listed companies by investing heavily in research and development and extensive mechanisation, such as automatic packaging system for sterile gloves and robotic dipping process simulation.
Mechanisation helped factories enhance productivity up to 30,000 gloves per hour per line, the highest rate in the industry, which also helped clip labour costs. Factory lines even changed the face of rubber gloves since it was first used in John Hopkins Hospital in the US in 1883.
In 2004, ambitious producers developed the world’s first high stress relaxation and lightweight nitrile examination glove weighing just 4.9g and four years later the weight was reduced to 3.7g. The industry basked in unparalleled success, even when global economies wilted.
In 2007, the sector was worth only RM5.9 billion but six years later the figures doubled. And nearly 14 million workers, both local and foreign, rely on these professionally-managed industries for a living.
Four major producers — Top Glove Corp Bhd, which controls 25% of world market share, Hartalega Holdings Bhd (23%), Supermax Corp Bhd (11%), Kossan Rubber Industries Bhd (10%) — are actively driving the industry.
This success story continues to sweeten more. World demand for rubber gloves could reach 165 billion pieces this year, with China, India and Vietnam chasing demand, mainly spurred by rising health awareness. This means Malaysian producers like Hartalega, Kossan, Supermax and Top Glove are looking at healthy earnings in 2014.
“Glove consumption is very resilient, when there is an influenza season or weather changes rapidly, demand increases.
Demand outlook for 2014 is consistent and stable. “There will be high growth from emerging markets and it will be a decent year for glovemakers,” said Ian Wan, an analyst from Alliance Research Sdn Bhd.
With latex supply and price stabilising (including supply from Thailand and Cambodia), strengthening of the US dollar against the ringgit, rising demand for gloves and supply under control, it all sounds favourable for Malaysia producers.
As the industry marches into 2014, it is likely to face some headwind, mainly from rising electricity tariff, excess production capacity and rising production cost — which manufacturers need to skirt around to maintain their competitiveness.
Production costs could go up between 5% and 8%. “The scenario for this year is that processing cost will continue to grow, production capacity is quite a lot already for this year.
“On the supply side it will be quite challenging, supply level is slightly higher than demand level. But this is a natural phenomenon for the glove industry, we always see a cyclical effect,” said Lim.
(Source: Malaysian Reserve)

Top Glove Corp Bhd