Malaysia’s global market share in gloves might shrink in the longer run if EMCO prolongs and plants remain shut

by RAHIMI YUNUS / pic by TMR FILE

MALAYSIAN rubber glovemakers said forced shutdowns under the Enhanced Movement Control Order (EMCO) in Selangor is costing them RM65 million a day in lost exports and will result in losing their export clients.

The group recently made a plea to the government to allow production to continue despite stricter rules regarding manufacturing in reaction to the ballooning Covid-19 cases in Selangor.

Malaysian Rubber Gloves Manufacturers Association president Dr Supramaniam Shanmugam said 780 million gloves per day are being produced in Selangor, where 60% of the country’s glovemakers are located.

“Customers may turn to other countries such as China and Vietnam to get the glove supply. We stand to lose the customer base that we have built over 30 years of hard work,” Supramaniam told The Malaysian Reserve (TMR).

If the EMCO prolongs and glove manufacturing plants remain shut in Selangor, he said Malaysia’s global market share in gloves might shrink in the longer run.

He said the glovemaker association is pleading to the government, specifically the Ministry of Plantation Industries and Commodity and the Ministry of International Trade and Industry (MITI), to allow them to operate under the EMCO.

He said gloves are an essential item not only for Malaysia but for the global supply and questioned why they could not operate when face-mask factories can.

Malaysian glove manufacturers contribute about 67% of the global supply or 320 billion pieces a year out of 480 billion pieces.

Competitors in China and Vietnam have been growing their capacity, albeit still deemed limited compared to Malaysia.

China and Vietnam contribute about 10% and 3% respectively of the global glove supply, according to Supramaniam.

He said once customers migrate to other suppliers, it would be hard to get them back. “We are making a very strong appeal to MITI and the National Security Council to have some reasonable thinking and put gloves as essential,” he said.

Just last week, in respond to public pressure to close down factories for being the main contributor to new Covid-19 cases, MITI Minister Datuk Seri Mohamed Azmin Ali said it is unfair to blame the manufacturing sector alone as from the 507 clusters detected between June 1 and June 23, only 195 were linked to the manufacturing sector.

Azmin said data by the Health Ministry also showed that the manufacturing sector contributed only 9.3% or 12,872 cases from the total 138,649 throughout the same period.

However, following the EMCO implemented in most parts of Selangor and some parts of Kuala Lumpur from Saturday, the government allows only food manufacturing factories and producers of essential daily needs would be allowed to operate, listing rice, white bread, sugar, cooking oil, flour, fresh milk, baby milk formula, drug and face mask producers as permitted businesses.

TMR previously reported that glovemakers are expected to announce lower dividends this year due to net profits normalising towards pre-pandemic levels on the back of weaker average selling prices (ASPs), analysts said.

An analyst with a local brokerage said ASPs are declining in tandem with global vaccination programmes and increasing supply from China-based glovemakers, thus heightening competition for Malaysian glove players.

Nevertheless, the analyst opined that glovemakers would still be asked to contribute with a special payment to the government this year with the same percentage as in 2020.

Another analyst believes Malaysia’s four largest glovemakers, Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd, would likely reserve more cash in order to compete instead of distributing it to investors.

Supramaniam said ASP would remain 15%-20% higher than pre-pandemic levels, at around US$70 (RM290.92) to US$80 per 1,000 pieces, on the back of the surge of Covid-19 variants that would still support the demand.

MIDF Amanah Investment Bank Bhd analyst Ng Bei Shan previously downgraded the glove sector to ‘Neutral’ from ‘Positive’, citing a lack of near-term catalysts as she thinks the upcycle of the sector is at its tail end.