Overcapacity a concern for rubber glove sector

PETALING JAYA: The rubber glove sector is unlikely to see meaningful recovery despite improving utilisation rates, as persistent overcapacity and pricing pressure continue to weigh on the industry, says BIMB Research.

The research house also downplayed concerns that recent Nipah virus headlines could provide a demand catalyst for the sector.

It noted that the outbreak in India has been limited to two confirmed cases in January 2026 with no further transmission and therefore “do not constitute a structural demand catalyst”.

“Despite the virus’s high historical fatality rate of 40% to 75%, past outbreaks have been rare and contained, and there is no evidence of panic restocking or increased bulk orders,” BIMB Research noted.

As a result, the brokerage firm said recent share price movements appear “sentiment-driven and short-lived, with fundamentals still anchored by persistent overcapacity and weak pricing power”.

In a sectoral outlook, the research outfit reiterated its “neutral” call, noting that while global glove demand has recovered to pre-pandemic levels, higher volumes are not translating into higher value.

It said “triple headwinds” of persistent oversupply, intensifying pricing pressure and a stronger ringgit are likely to curb any meaningful upside for the sector.

Before the pandemic, BIMB Research noted that Malaysia’s glove industry was a stable and growing sector, supported by an annual volume growth of about 6% to 7% and relatively stable average selling prices (ASPs).

Malaysia was the world’s largest glove producer then, with roughly 60% of global market share.

This equilibrium was disrupted in 2020 when the Covid-19 pandemic triggered an unprecedented surge in global glove demand, driving Malaysian output up by 85% year-on-year, while ASPs rose by more than 70%, lifting utilisation rates to record highs and resulting in what BIMB Research described as “a period of supernormal profitability”.

In response, BIMB Research said manufacturers embarked on aggressive capacity expansion to capture market share.

“But, the swift normalisation of demand, combined with rapid capacity additions from China and other emerging markets quickly turned the boom into a bust, leaving the industry saddled with excess capacity and structurally weaker pricing once the temporary demand shock faded,” it said.

The research firm said 2023 saw utilisation rates plunging to as low as 50% for some producers, reflecting the lingering mismatch between oversupplied capacity and post-pandemic demand.

While the latest available data show a gradual recovery, with key players now reporting utilisation of around 72% to 75%, supported partly by the retirement or temporary suspension of older and less efficient production lines, BIMB Research said installed capacity remains significantly under-absorbed relative to global demand.

During the height of the expansion, BIMB Research noted that Malaysian manufacturers added between three billion and eight billion pieces to their annual capacity.

Top Glove Corp Bhd, the largest player, was operating at a capacity of around 65 billion to 85 billion pieces per annum, it added.

According to the research firm, by 2022-2023, the combined annual capacity of the top four listed Malaysian glove producers had risen to just over 200 billion pieces, representing roughly a 50% increase from pre-pandemic levels.

“Nonetheless, following the demand normalisation post-Covid, this rapid build-up has then far outstripped the underlying global consumption growth,” it said.

“The consequence: an oversupplied market with chronic under-utilisation and relentless pricing pressure.”

Looking ahead, BIMB Research said the global glove industry remains structurally oversupplied, with installed capacity still well above sustainable demand despite selective rationalisation by Malaysian producers.

This imbalance, it said, is likely to persist as Chinese manufacturers continue to expand aggressively, both domestically and via offshore facilities in Asean.

“New plants in Indonesia and Vietnam alone could add up to 60 billion to 80 billion pieces of capacity over the years, potentially pressuring ASPs lower to US$15 to US$16 per 1,000 pieces, suggesting that any recovery beyond US$18 to US$20 per 1,000 pieces will be difficult in the absence of meaningful consolidation,” it added.

It highlighted that glove ASPs, once exceeding US$50 per 1,000 pieces during the pandemic, have since reverted to structurally lower levels. They declined to US$27 in 2022, fell further to US$22 in 2023, and hovered near historic lows of around US$20 in 2024 and 2025.

From a valuation perspective, BIMB Research said the sector may appear “optically cheap”, but remains fundamentally constrained by weak pricing power and excess capacity. “Hence, we remain tactically cautious on the sector.”