Glove makers under Hong Leong Investment Bank (HLIB)’s coverage have declined significantly in the first half of 2025 (1H2025), with share prices down between -47% to -59%.
The sector was first weighed down by growing investor risk aversion towards export-oriented sectors in early-2025 in view of the potential unfavourable reciprocal tariffs to be imposed on Malaysia imports by US President Trump post his inauguration.
Sentiment was further dampened by earnings disappointments from Hartalega and Kossan in Feb 2025, which missed both our and consensus estimates.
This was accompanied by a weak forward guidance from Hartalega, which flagged the possibility of returning to losses in upcoming quarters and raised concerns over Chinese peers’ expansion into Southeast Asia (SEA).
“Based on our checks, sales orders for generic medical examination rubber gloves remain subdued since Feb 2025, with the US replenishment cycle guidance continuing to be pushed back,” said HLIB.
According to the glove makers, the softness was primarily attributed to US distributors still sitting on the front-loaded inventories, while ex-US markets are facing fierce competition from Chinese players.
We believe that the muted US demand faced by Malaysian manufacturers may also be linked to transhipment activities by Chinese peers, who rerouted shipments through Thailand, Indonesia, and Vietnam, before exporting to the US.
This is evidenced by the rising market share and imported customs values from these countries, even as total US customs values for imported medical and surgical rubber gloves during March-April 2025 remained comparable to the front-loading period in October-November 2024.
For pricing, glove makers have indicated the average selling point (ASP) for generic medical examination rubber gloves will remain in a downtrend due to lower raw material prices and ongoing fierce competition domestically and regionally.
Based on our channel checks, there will be about 5-8 bil pcs/annum coming online in Vietnam and c.5bn pcs/annum in Indonesia by end-2025. In addition, we estimated that Intco will add 10 bil pcs/annum from China itself in 2025.
On a positive note, there remains potential for a gradual demand shift among US buyers from vinyl gloves to nitrile rubber gloves should the ongoing 90-day tariff negotiations between the US and China end unfavourably.
This substitution effect, estimated at an additional 28-38 bil pcs/annum, could help absorb the incoming supply from Intco’s expanded capacity, thereby supporting the path toward restoring supply-demand equilibrium by 2026, based on our view. —July 21, 2025
Main image: Reuters
