by FAYYADH JAAFAR / pic TMR
THE average selling price (ASP) and earnings outlook for local glovemakers remain challenging with potential tariff removal on Chinese consumer goods by the US, said Maybank Investment Bank Bhd (Maybank IB).
The tariff removal, reportedly to take place this week, would allow the Chinese glovemakers to sell their products at lower prices.
“The potential tariff removal on Chinese consumer goods (gloves) will be a negative event for the Malaysian glovemakers, as it would allow the Chinese glovemakers to sell their products at lower prices.”
“Without the import tariffs, there will be more room for the Chinese glovemakers to adjust their pricing and that could lead to a further cut in ASP, we think. We were told that the Chinese glovemakers are currently selling below US$20 (RM88.60)/k pcs compared to Malaysian makers’ of around US$22–US$24/k pcs,” Maybank IB said in a note today.
If the current 7.5% tariff on Chinese gloves were removed, then the ASP of these gloves could fall further as the Chinese glovemakers would have more room to adjust their pricing in order to capture market share in the US.
Maybank IB maintains a ‘Negative’ stance on the glove sector.
“Losses are likely if the price war is seen to be escalating, we believe,” it said.
According to Maybank IB, the demand-supply disequilibrium taking a shorter time to rebalance, higher demand/consumption for gloves from non-healthcare industries post pandemic, industry consolidation that reduces oversupply risk, and higher than expected ASP as upside risks to the sector.