The Best is over for the Rubber glove Industry with glove manufacturing noting ASP erosions, slowing from the current USD28.00-30.00/1,000 pcs mark, and operating margins coming close to pre-pandemic levels.
RHB said that with the immediate term the risk of the price war intensifying has toned down – given capacity restrictions and the energy crunch that is ongoing in China.
It said that it does not exclude the possibility of the price war risk worsening once the situation normalises. Major manufacturers are only currently running at 60-70% utilisation rate, with KRI being the exception thus far (at 75-80% currently),” RHB said.
RHB said that demand remains soft as buyers continue to practice making minimal purchases to prevent sitting on high-cost inventory.
“We believe companies that expanded the most throughout the pandemic are at a greater risk of recording poor utilisation rates going forward. Moreover, a prolonged period of sub-optimal utilisation rates should heighten the risk of further delays in capacity expansion, the research house said.
RHB said that the emergence of the new variant Omicron could boost sales volume rather than ASPs.
It said that it believes the emergence of the new variant does not mean a reset to 2020 because the majority of the global population is no longer immune-naïve and policymakers and their respective healthcare systems are better prepared and equipped.
In addition, RHB said that a shorter turnaround time to develop variant-specific vaccines with most countries has accelerated their booster shot policy and expanded vaccine access to lower-aged groups, and major manufacturers have undergone significant expansion plans and are currently running at below optimal utilisation rates.
