Based on its estimates, the demand-supply situation would only start to head towards an equilibrium in 2025 when there is virtually no more new capacity coming onstream, while the global demand for gloves continues to rise by 15% per annum underpinned by rising hygiene awareness.
“We project the demand for gloves to rise by 15% in 2023, which is consistent with the Malaysian Rubber Glove Manufacturers Association’s (MARGMA) forecast.
“However, this will do little to ease the overcapacity situation as the global glove production capacity will grow by 16% to 595 billion pieces during the year.
“(This is) more capacity planned by incumbent and new players during the pandemic years, enticed by super-fat margins that had eventually evaporated, finally comes on line,” it said in a sector update on the glove industry.
This would result in the excess capacity rising by 22% to 137 billion pieces from 112 billion pieces in 2022, it added.
Kenanga Research has reiterated an “underweight” call for the sector as widened overcapacity means low prices and depressed plant utilisation would likely persist in 2023.
Compounding the already dire situation is the reluctance of customers to commit to sizeable orders and hold substantial stocks on expectations of further decline in prices.
The research firm’s 2023 forecast assumption is derived from an average selling price (ASP) per 1,000 pieces of US$20 (RM87.85), translating to an estimated 10% decline over 2022, and an average plant utilisation of 50% versus an estimated 60% in 2022.
During the 2014-2015 downturn, the ASP of nitrile gloves went as low as US$17-US$18 (RM74.70-RM79.08) per 1,000 pieces while industry utilisation was at 65-70%.
“We advocate investors to avoid the sector for now and not have any top pick for the sector,” it added.
MARGMA projects a 12-15% growth in the global demand for rubber gloves annually from 2023, following an estimated 19% contraction to 399 billion pieces in 2022.
The association believes the supply-demand equilibrium may return in six to nine months.