Global shortage of gloves to persist for next two to three years
17 Dec 2020
Global glove demand is expected to grow 15-25% annually over the next two to three years on the back of higher usage and increased healthcare awareness.
Despite glove makers’ best efforts and aggressive expansion plans to capture this demand growth, the global supply growth in the next two to three years would likely still not catch up with the demand increase, CGS CIMB Research said in a note.
“Though we expect mass rollouts of Covid-19 vaccines in 2021, we believe the glove shortage will persist; glove makers continue to highlight that their capacity is fully taken up until at least 1QCY22. Due to the supply shortage currently, we also gather that certain glove buyers are willing to lock-in large volume orders at a premium to current average selling prices (ASPs) to ensure sufficient glove supply next year. “
It said glove makers expect ASPs to continue rising on a monthly basis up to at least end-1Q’21, without discounting further hikes going forward.
This is given the supply shortage globally, as well as to pass on rising raw material prices, higher labour costs, and the recent strengthening of the ringgit against the US dollar.
It added going forward, glove makers are expected to continue recording stronger quarters, backed by higher ASPs, increase in production capacity, and higher economies of scale.
“We have assumed ASPs will continue on an uptrend to only 1Q’21, hitting a conservative average of US$60/1,000 pieces of gloves in that quarter (already at a 20-40% discount to current ASPs),” it said.
Overall, the research house is maintaining its ‘overweight’ call on the sector with its top picks being Hartalega and Top Glove. It also still has ‘add’ calls on Supermax and Kossan.
Source: The Sun Daily