In a research note today, the investment bank highlighted that Malaysia’s glove export volume rose by 8% quarter-on-quarter (q-o-q) and 29% year-on-year (y-o-y) in the second quarter of 2024 (Q2 2024), outpacing a 6% decline q-o-q and a 0.3% y-o-y.
Its export value climbed 10% q-o-q to RM3.6 billion versus RM3.3 billion in the first quarter of 2024 (Q1 2024).
Conversely, China’s glove exports remained relatively flat q-o-q, following a 3% q-o-q growth in Q1 2024.
RHB IB noted that the Malaysian Rubber Glove Manufacturers Association (MARGMA) expects global glove demand to grow at a compound annual growth rate (CAGR) of 10% from 2023 to 2027, reaching 450 billion pieces by 2027.
Therefore, the investment bank has maintained its “overweight” rating on the sector as glovemakers anticipate stronger Q2 2024 results in August due to better demand visibility and increasing average selling prices (ASPs).
The production run rate has improved, with order volumes in Q2 2024 set to grow by at least 10% q-o-q.
“Moving forward, we expect a meaningful demand recovery trend to manifest in H2 2024, coupled with an ASP pick-up, to propel glovemakers’ profitability in 2024,” RHB IB said.
RHB IB has forecasted industry demand-supply equilibrium by the end of 2024.
Additionally, RHB IB said that it anticipates the risk of price competition from Chinese peers to subside due to quality concerns, resulting in higher rejection rates from the US Food and Drug Administration and Chinese players’ pivot towards sustainability.
RHB IB said the plant utilisation rate has improved post-2023’s capacity rationing exercises.
Local manufacturers are operating at 60%-80% capacity, up from 40%-70% previously, with the global supply expected to increase by 7.3 billion pieces in 2024, driven by capacity expansions from Hartalega Holdings Bhd (four billion pieces), Top Glove Corp (three billion), and Sri Trang Gloves Thailand (0.3 billion pieces).
The investment bank also noted that the recently announced 25% tariff on China-made medical-grade gloves is set to drive a trade diversion towards Malaysian-made products.
RHB IB said it expects Hartalega to be the prime beneficiary due to its 50% revenue from North America, followed by Kossan, Supermax, and Top Glove.