Rubber glove sector feeling stretched

ONCE a pandemic darling, rubber glove makers are now facing growing uncertainties with a confluence of negatives amid a persistent oversupply that doesn’t seem to be going away.

The latest negative variable to plague rubber glove makers is the US tariff negotiations – which now appear to be a race to see which country can secure the lowest rates to continue benefiting economically from exports to the country by Aug 1.

A lower tariff rate would mean greater competitive advantages that could hugely influence foreign direct investment (FDI) flows, especially when compared to our Asean neighbours.

Earlier in the week, Indonesia secured a lower tariff rate of 19%, which is significantly below the 32% level announced earlier.

It is the second country to secure a deal for lower tariffs, after Vietnam, which saw its tariff rate lowered to 20% some weeks back.

Malaysia’s tariff rate remains at 25% but this could change later. As Malaysia’s main export destination, the United States has been a major market for rubber gloves for many years.

According to data from the Statistics Department, rubber glove exports from Malaysia to the United States in 2024 totalled RM6.14bil last year, which is close to 40% of total rubber glove exports.

Given the rubber glove industry’s reliance on the US market, even a minor disruption could pose significant challenges for the sector here.

Concerns appear to be building up amid still lofty valuations that these rubber glove manufacturers are trading at.

Currently, Top Glove Corp Bhd trades at 84 times trailing price-to-earnings ratio (PE), Hartalega Holdings Bhd at 66 times PE and Kossan Rubber Industries Bhd at 27 times PE.

Their share prices have been hurt due to these concerns coupled with the continued oversupply, and the latest round of selling has brought this down to multi-year lows.

Top Glove, which also has a vinyl glove manufacturing facility in Vietnam, closed on Thursday at 67.5 sen, Hartalega at RM1.42 and Kossan at RM1.31.

Even Supermax Corp Bhd, which has its wholly owned manufacturing facility in the United States through Maxter Healthcare Pte Ltd, isn’t spared the ongoing selldown as its share price fell to 58.5 sen.

IR 4.0 makes things easier

With the rise of the adoption of automation with the Industrial Revolution 4.0 and artificial intelligence, it seems that barriers to entry into the rubber glove-making industry have been further lowered – since there is less of a need to source or train workers on the production line.

Thus, in the sum of things – due to potential economic gains, the rubber glove-making sector appears to be an easy target for any firm reshoring plans by the United States.

On July 11, it was reported that the American Medical Manufacturers Association (AMMA) had published a statement to call on the US government to reject Malaysia’s push for special tariff exemptions on rubber gloves, saying such “carve-outs” would hurt the US job market and supply chain resilience.

AMMA had urged the US government to prioritise America’s domestic manufacturing base and retain uniformity in the proposed 25% tariff.

Notably, AMMA said that the United States’ domestic manufacturers are ready to meet its local demand “without exceptions nor excuses”.

In the statement, Supermax-owned US unit Maxter Healthcare’s director for business development and government affairs said: “While we have a presence in Malaysia, we believe the future of manufacturing medical supplies and PPE for the United States is in the United States.

“Our US$350mil Texas facility proves that global companies can and should invest in America to serve American needs.”

This follows the Malaysian Rubber Glove Manufacturers Association’s letter urging the government to seek special tariff exemptions for Malaysian gloves by telling the United States that higher duties would disrupt and increase American healthcare costs.

It would appear that plans to reshore manufacturing to the United States for its own domestic production seem to be gaining momentum on the ground as well.

Thus, it is logical to conclude that any potential trade deal on tariffs with the United States is quite unlikely to include exemptions for rubber gloves.