Glovemakers lose their grip

GLOVE stocks, once the darlings of investors at the height of the Covid-19 pandemic, are now in the doldrums.

As investors shy away, the Big Four glove counters in Malaysia have plunged by over 50% to 60% so far this year.

Hartalega Holdings Bhd and Top Glove Corp Bhd, for example, have lost over RM9bil and RM5bil in market capitalisation respectively since the start of 2025.

To put it into perspective, these are two of the world’s largest glove producers.

The current state of glovemakers is the result of a structural glove oversupply globally and a brewing price war as Chinese producers accelerate overseas expansion, including in Vietnam, Thailand and Indonesia.

Glovemakers from China are using these overseas capacities to sell to the United States market as a way to skirt the heavy tariff imposed on Chinese goods.

For instance, Shenzhen-listed INTCO Medical aims to start its first five billion pieces-per year glove plant in Indonesia by end-2025.

As for the gloves made in China, they are targeted for non-US markets. Chinese glove manufacturers have been aggressively offloading their inventories into the non-US markets such as Europe and Asia, pushing the prices lower.

In a report earlier this month, Maybank Investment Bank (Maybank IB) Research said the Chinese players have been able to produce gloves at cheaper prices.

The production cost in overseas Chinese glove factories range from US$14 to US$15 per 1,000 pieces (k/pcs), while Malaysia’s production cost is slightly higher at US$15 to US$16 k/pcs.

Maybank IB has cautioned that Malaysian glovemakers have limited pricing power and could risk losing US market share once the new capacity from the overseas Chinese plants comes online by end-2025 to early 2026.

“Competition is intensifying not just internationally but also at home, with a major glove maker in Malaysia aggressively cutting prices to gain US market share ahead of China players re-entering the market via overseas capacity.

“Elsewhere, we understand that the anticipated restocking in the United States post-Dec 2024 front-loaded orders did not materialise in the first half of 2025, as China glovemakers had stocked up their US warehouses in advance, based on our channel checks.

“We suspect some major players in Thailand and Malaysia, with warehouse facilities in the United States, could have taken advantage of the three-month 10% tariff window to ramp up shipments to US, at the expense of other Malaysian glovemakers who lack such infrastructure.

“By the time meaningful restocking kicks in, new China capacity in Asean would likely be ready, leaving a narrow window for Malaysian players to compete,” according to Maybank IB.

Against such headwinds, Malaysian glove producers have to juggle depressed glove average selling prices (ASPs) and a weak market demand.

This has kept glovemakers’ factory utilisation rates below the optimum levels.

Top Glove’s utilisation rate was reported at 65% as of June 2025, and Hartalega’s rate stood at 67% for the quarter ended June.

This has taken a major toll on earnings.

In fact, the bottomline of Top Glove and Hartalega in the latest full financial year were lower than what was achieved in pre-pandemic financial year 2019 (FY19).

For context, Hartalega made a net profit of RM455.2mil in FY19 ended March 31, 2019 and RM74.5mil in FY25.

Top Glove, on the other hand, reported a net loss of RM64.9mil in FY24 ended Aug 31, 2024 as compared to a net profit of RM364.7mil in FY19.

This year, the first-quarter earnings have been underwhelming for the glove sector despite some improvements.

Analysts think the upcoming quarter’s prospects will likely remain clouded.

Hartalega, which has announced its results for the April to June quarter, saw its net profit slumping by over 60% year-on-year. This was due to weaker sales volume as buyers hold off making purchases, waiting for better tariff clarity.

Kenanga Research said in a note that Hartalega management is optimistic of orders returning.

“As US glove inventory drops to low levels with frontloaded gloves depleting, it foresees order replenishment will be needed soon that could translate to a sudden orders uptick.

“It specifically highlighted a solid recovery in the second quarter of financial year 2026 (2Q26) and expects an uptick in demand from 3Q26 onwards.

“It has seen monthly orders hitting 2.1 billion pieces versus 1.9 billion pieces in 1Q26 and is targeting to hit 2.3 billion in the second half of financial year 2026.”

According to Kenanga Research, Hartalega is of the opinion that tariffs will regulate the glove industry and cushion any unfair price dumping which is positive to Malaysian glovemakers.

Despite the optimism, it remains to be seen whether the ASPs can improve significantly amid the high supply condition and the willingness of China glovemakers to throw prices.

For now, it seems that ASPs will likely remain flat.

TA Research, which is “underweight” on the glove sector, believes that the global oversupply will persist for at least the next three years amid increasing competition from Thailand, Indonesia and Vietnam.

“We believe that the margins for the glove industry would not revert to pre-pandemic for the foreseeable future.

“Furthermore, Malaysian glove players are likely to continue losing market share in the non-US markets to the Chinese manufacturers.”

Hong Leong Investment Bank Research also stays cautious on the glove sector, pointing at the growing uncertainties over supply-demand equilibrium in 2026.

The glove sector is surely improving from its worst post-pandemic downturn, yet the best days that were seen during the Covid-19 times are likely well behind.

Glovemakers will continue to face difficulties in navigating the glove glut in a market where the room to negotiate prices is small. After all, there won’t be a sudden increase in buyers to take up the excess capacity.

The headwinds will remain unless the industry goes through a consolidation or existing players, including the China players, limit their production to help the market find its equilibrium sooner.