Friday, August 14

Demand for rubber gloves continue to surprise

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Unless Covid-19 is no longer a threat, the robust demand for rubber gloves is likely to stay. — Bernama photo

KUCHING: Demand for rubber gloves has continued to surprise us on the upside, as some manufacturers have started accepting orders for delivery one year in advance with 20 per cent deposits.

According to Affin Hwang Investment Bank Bhd (AffinHwang Capital), the strong demand has also given manufacturers the flexibility to continue raising selling prices, which they are now forecasting at five to eight per cent per month starting from June – higher than the one or two per cent forecasted earlier.

“Although selling prices will only be confirmed one or two months prior to delivery, buyers are still likely to take delivery or risk losing their deposits,” it said in a sector outlook yesterday.

“With the current robust demand, we believe that the sector should achieve record earnings in 2020. Unless Covid-19 is no longer a threat, the robust demand for rubber gloves is likely to stay.”

Given that it is only expecting a 10 to 12 per cent increase in (effective) capacity in 2020, AffinHwang Capital believe that there will still be shortages of gloves in 2021, although the problem is not as severe as currently experienced.

“As such, we are forecasting average selling prices (ASPs) to increase by around three to five per cent for the whole 2021,” it continued.

“However, we believe that demand could ease if a vaccine for Covid-19 is available to the public.

“As such we are maintaining our overweight call on the sector, as we believe that there is a high certainty on the sector earnings.”

Public Investment Bank Bhd (PublicInvest Research) concurred, as the Covid-19 pandemic worsens across the globe, demand for rubber gloves continues to grow.

“Lead time for rubber gloves has also increased to six to 12 months, as opposed to its normal level of one to 1.5 months prior to the Covid-19 outbreak, depending on the type of gloves,” it said in a company note on Top Glove Corporation Bhd.

“Lead time for surgical gloves are on the lower end of the spectrum of six months, as hospitals are scaling back on elective surgeries.

“ASP for rubber gloves has also been on an uptrend since the demand surge starting end-January and we expect the strong ASP to sustain, given the current global shortage in rubber gloves.”