RHB IB Anticipates Global Glove Demand To Grow By 22 Pct in 2H 2024

KUALA LUMPUR, July 31 (Bernama) -- RHB Investment Bank Bhd has anticipated a 22 per cent growth in global glove demand, based on a recovery in restocking activities in the second half of 2024 (2H 2024).

In a research note today, the investment bank highlighted that Malaysia's glove export volume rose by eight per cent quarter-on-quarter (q-o-q) and 29 per cent year-on-year (y-o-y) in 2Q 2024, outpacing a six per cent decline q-o-q and a 0.3 per cent y-o-y.

Its export value climbed 10 per cent q-o-q to RM3.6 billion versus RM3.3 billion in 1Q 2024.

Conversely, China's glove exports remained relatively flat q-o-q, following a three per cent q-o-q growth in 1Q 2024.

RHB Investment Bank noted that the Malaysian Rubber Glove Manufacturers Association (MARGMA) is expecting global glove demand to chart a 2023-2027 compound annual growth rate (CAGR) of 10 per cent, to reach 450 billion pieces by 2027.

Therefore, the bank has maintained its overweight rating on the sector as glovemakers anticipate stronger 2Q 2024 results in August due to better demand visibility and increasing average selling prices (ASPs).

The production run rate has improved, with order volumes in 2Q 2024 set to grow by at least 10 per cent q-o-q.

“Moving forward, we expect a meaningful demand recovery trend to manifest in 2H 2024, coupled with an ASP pick-up, to propel glovemakers’ profitability in 2024,” the investment bank said.

RHB IB said it forecasts to see industry demand-supply equilibrium by end-2024.

Additionally, it anticipates the risk of price competition from Chinese peers to subside due to quality concerns, resulting in higher rejection rates from the US Food and Drug Administration and Chinese players' pivot towards sustainability.

RHB IB said plant utilisation rate has improved post-2023's capacity rationing exercises.

Local manufacturers are operating at 60-80 per cent capacity, up from 40-70 per cent previously, with the global supply expected to increase by 7.3 billion pieces in 2024, driven by capacity expansions from Hartalega Holdings Bhd (4 billion pieces), Top Glove Corp (3 billion), and Sri Trang Gloves Thailand (0.3 billion pieces).

The bank also noted that the recently announced 25 per cent tariff on China-made medical-grade gloves is set to drive a trade diversion towards Malaysian-made products.

RHB IB expects Hartalega to be the prime beneficiary due to its 50 per cent revenue from North America, followed by Kossan, Supermax, and Top Glove.

-- BERNAMA