HLIB: Hormuz disruption eases glove oversupply
KUALA LUMPUR: THE ongoing Strait of Hormuz blockade has disrupted naphtha flows from the Middle East, directly constraining the availability of nitrile butadiene rubber (NBR) used in medical gloves.
Analysis by HLIB suggested that a 37 per cent drop in naphtha supply could meaningfully narrow the excess glove supply situation.
HLIB noted that a similar reduction in naphtha could cut nitrile glove capacity by roughly 25 per cent of total global capacity, lowering supply to about 384 billion pieces per year while demand remains steady at 341 billion pieces.
"This could narrow the supply glut and potentially support a gradual recovery in glovemakers' pricing power," the firm said in a note.
For 2026, HLIB had initially assumed global glove plant utilisation at around 67 per cent, below the typical 85 per cent equilibrium level, with an annual supply of 512 billion pieces against an assumed demand of 341 billion pieces.
Last week, reports cited the Malaysian Rubber Glove Manufacturers Association (MARGMA) saying the blockade had severely disrupted global shipping routes. This has directly affected the availability and cost of NBR latex, a petroleum-derived synthetic latex.
Nitrile glove capacity generally follows consumption patterns, with the US and Europe – which predominantly use nitrile gloves – accounting for about 65 per cent of global usage in 2019.
HLIB said larger glove producers are likely to benefit from the current scenario at the expense of smaller players, who often depend on a single NBR supplier and may struggle to secure alternatives during disruptions.
New suppliers tend to prioritise established buyers with stronger credit profiles and proven track records.
NBR suppliers have also been requiring 20–30 per cent down payments since March 19, with the potential for higher prepayments if geopolitical tensions continue.
In a low-margin environment, such cash demands strain working capital and raise the financial barrier for smaller players.
Even the three largest Malaysian glove makers – Top Glove Corp Bhd, Hartalega Holdings Bhd, and Kossan Rubber Industries Bhd – reported subpar returns on equity of around 3.7–4.0 per cent in the latest quarter, against a cost of equity of 9.4–10.6 per cent.
HLIB said raw material shortages and temporary plant shutdowns could encourage smaller players to permanently exit the market.
"In our view, larger glove producers are likely to benefit from this scenario, likely at the expense of smaller players given their concentrated supply chains and new NBR prepayment requirements.
"For now, we maintain our 'neutral' stance on the sector, as our thesis is premised on the Iran war being a prolonged conflict.
"That said, the longer the Iran war lasts, it could paradoxically accelerate the market's return to equilibrium by weeding out weaker producers," it noted.