Glove makers face bleak near-term prospects

KUALA LUMPUR: Near-term prospects for the rubber glove sector remain bleak due to an unfavourable operating environment caused by price competition, said CIMB Securities.

It said average selling prices will remain flat on a quarterly basis as cost pass-through continues to challenge players amid persistent price competition in non-United States markets and ongoing oversupply situations.

However, the firm expects a near-term reprieve for sector earnings, supported by a recovery in volume sales driven by higher demand from buyer restocking activities and a favourable cost environment.

"A favourable cost environment along with better clarity on tariffs effective Aug 1, should provide a favourable backdrop for glove manufacturers," it said in a note.

New manufacturing plants in Vietnam, Indonesia, and Cambodia by Chinese manufacturers are seen as a tactical move in response to higher import tariffs being imposed by the US administration on Chinese imports.

Gloves imported from China to the US are now subject to an import tariff of 80 per cent in 2025, with the rate expected to increase further to 130 per cent by 2026.

The firm said China's share of US glove imports has fallen to 3 per cent as of July 2025, a significant reduction from the 2024 peak of more than 40 per cent.

"We expect the threat of hostile pricing strategies from Chinese manufacturers to persist as they attempt to regain market share in the US.

"That said, we do not foresee any near-term re-rating catalysts, particularly against the backdrop of persistent dollar-ringgit weakness and a challenging cost pass-through environment," it added.

Key headwinds in the fourth quarter remain the potential threat posed by the upcoming commissioning of new glove plants in Southeast Asia, including the new Intco glove manufacturing plant in Medan, Indonesia.

The planned capacity of the Intco plant is estimated to rival Hartalega Holdings Bhd's current manufacturing capacity of 37 billion pieces, based on its projected labour force scale.

"Although full commissioning is likely to take time, we expect the initial commencement of order deliveries in the fourth quarter to further erode Malaysia's share in the US market," it said.

The firm kept its "Neutral" call on the sector, with Kossan Rubber Industries Bhd as its top pick.

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