Glove Business Will Remain Hot In The Foreseeable Future
Industry Overview and Numbers
This subject is worthy of its own thesis, but for the sake of brevity, we will highlight our thoughts both anecdotally and with some high-level data to explain why we think that the glove business will remain hot in the foreseeable future. We anticipate that prices will not fall off the cliff, and demand will continue to be strong, at least for the next 36 months.
By Anecdotal Observation
Public perception of oversupply is largely due to the media’s over romanticization of newly minted billionaires in Malaysia as share prices of their public-listed companies soared to dizzying heights in 2020.
This encourages existing players to increase their current capacities and entices new entrants with zero background in glove manufacturing to join the bandwagon with hundreds of millions poured into new production lines.
Fast forward to Q3 in 2021, prices started to come down after the initial euphoria and people are starting to speculate that it’s due to oversupply. On top of that, negative press about individuals and companies getting scammed are rampant and suddenly, talks of imminent price crash are rife.
Even when the world goes back to “normal” in the next 12 to 18 months, there will be a heightened awareness of the need for gloves and other PPEs at least for an extended period of time. Millions of people who work in hotels, sporting venues, office buildings, retail, entertainment centres, restaurants, and other places where usage of gloves was not prevalent before COVID-19 will now have a “new normal” for the next few years where gloves will be part of their daily routine.
By The Numbers
The growth and undersupply situation were not caused by COVID-19. The rubber glove industry was already a high-growth industry, and under-supply was a yearly occurrence for the last 20 years! Just look at the last 3 years below and the other facts listed:
1. Pre pandemic global demand numbers: 2018 & 2019
Source: TheEdge “MARGMA expects a shortfall of 80 bil pieces of rubber gloves this year as demand continues to outstrip supply”: https://www.theedgemarkets.com/article/margma-says-glove-demand-expected-continue-being-robust-until-2q2022
2. Growth demand for rubber glove industry since 2002 – Without COVID-19
3. Lead time before Covid was 45 – 60 days which was understandable because there were shortages in supply every year for more than a decade. The anomaly caused by COVID last year causes the lead time to jump to over 300 days, and today it has tapered down to 200 days which is still a very big number.
4. Demand estimate for 2021 is around 500 billion pieces according to MARGMA but another study places the demand closer to 600 billion pieces. The estimated global capacity to supply, even with new producers included is at 466 billion pieces
5. Big new players barely add 15 billion new pieces to this year’s total supply, and not all will achieve full capacity this year. Here’s a look at a few of them:
- Johan Holdings, a lost making multi-sector player in general trading, building materials, hospitality, and card services is planning to open 42 lines to churn out 12 billion pieces annually. Six will be operational by end of 2021. The remaining will be built in stages between 2022 – 2023
- Another outsider throwing itself into the fray is an Information technology company, MSCM Holdings Bhd with plans to have 6 lines running by the end of 2021 through its wholly-owned subsidiary Hong Seng Glove Sdn Bhd. Assuming that each line (conservatively) is able to produce 30,000 pieces per hour, this is estimated to produce around 1.5 billion pieces annually
- Mah Sing Group, a plastics manufacturing company is planning to produce 68 billion pieces from 12 lines scheduled to be operational in Q2 and Q3 of 2021
- Malaysia produces around 65% – 67% of global glove demand. The world practically depends on Malaysia’s capacity to supply them with gloves and any missteps could widen the demand and supply gap even further. Unfortunately, there have been quite a few mishaps:
- Multiple Movement Control Orders impacting production, Malaysian is officially in a state of emergency since January of 2021. At the time of this writing, glove factories from the single largest producing state (Selangor) are not allowed to operate to their full capacities.
- The U.S ban on gloves from TOP GLOVE after accusing them of using forced labour
- TOP GLOVE was forced to halt production after thousands of its employees was tested positive for the Corona Virus in late 2020. TOP GLOVE is the world’s largest glove producer with planned capacity exceeding 100 billion pieces by end of 2021
- More gloves are also needed to administer vaccines for the next 2 to 3 years. Contrary to popular belief (or ignorance), you don’t stop only after 2 jabs for any of the COVID Vaccines. Further doses are required moving forward.
It is easy to see why many horror stories involve an endless chain of agents of other agents involving glove scams. The pandemic causes demand to skyrocket and the lead time to get these “precious” items are easily up to a year or more. We all know that those who require medical gloves during these times, cannot afford to wait even for one week, let alone the entire year. Desperation left many with no choice but to pay a king’s ransom to get their merchandise.
Manufacturers have since ramped up productions but lead time is still easily half a year. With the virus showing no signs of going away anytime soon plus greater awareness of the needs for PPE in general and glove specifically, demand will continue to outgrow supplies in the next couple of years.
While all major producers are booked till the next year, there is a genuine opportunity for overseas buyers to get quality suppliers from less known, boutique manufacturers. Many of whom have existed for decades serving the local market. Seeing the opportunity, many have ramped up production but overseas buyers are more accustomed to big names.
The challenge for them is to ascertain that the smaller suppliers have proper quality certification for their products and licenses to export to certain markets.