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Rising cases to sustain gloves’ demand trajectory

Rising cases to sustain gloves’ demand trajectory

08 Oct 2020

The escalation in Covid-19 cases worldwide is not show any signs of abating, and without any concrete timeline for vaccines, analysts believe demand for gloves should sustain.

From this, the team at Hong Leong Investment Bank Bhd (HLIB Research) envisage greater earnings to follow into CY21 for glove makers paired with strong fundamentals.

As of time of writing, the reported number of Covid-19 cases worldwide was 36.1 million with 7.9 million active cases and a death rate of 3.7 per cent. The spread rate per subsequent one million cases currently hovers between three to four days, more rapid than the initial two weeks when the pandemic first broke out.

“The highest active cases thus far would be from the US with 7.7 million cases to date, with a death rate of 4.2 per cent; moreover US being the largest glove consumer (circa 150 pieces per capita), we can use this as an indicator for demand of gloves to rise,” it said in a sector update yesterday.

“In the US, while Covid-19 cases declined in July, it started to pick up again in early-September. This coincides with the beginning/ transitioning of season to autumn in the Northern Hemisphere, which also usually marks the beginning of flu season (especially come winter, more cases are expected).”

HLIB Research said the risk of rising Covid count amid the colder weather, alongside the “flu season” should sustain the upward demand trajectory for gloves.

Researches are currently testing 44 vaccines in trials on humans with at least 91 preclinical vaccines are under active testing on animals. While work on vaccine started back in January 2020, and more intensely in April, there are still none that have yet to receive full use approval.

“Even big pharmaceutical giants like AstraZeneca faced hiccups and had to halt vaccine trials due to an unexplained illness in their voluntary study,” it added. “While optimists expect a vaccine discovery by year end, we reckon that this seems like a longshot.

“Looking back in history, the fastest vaccine to be developed and approved was for mumps, which took 4 years.

“Past experience has shown that even with vaccine discovery, demand for gloves did not fall immediately, as rollout for mass immunisation would take time. In addition, gloves will still be needed for testing and administrating the vaccine.”

With Covid-19 cases showing no signs of slowing down paired with no concrete vaccine timeline, HLIB Research expect CY21 earnings to be fuelled by the continuous surge in demand for gloves, spill over to an expected higher average selling prices (ASPs) on increased orders, and elevated utilisation rates of above 95 per cent.

“We see it to maintained till at least 1HCY21. Some channel checks showed that the lead time of glove manufacturers are now at a minimum eight months while there are manufacturers that are looking at more than a year,” it cited.

“It is noted that blended ASPs of nitrile gloves are high between US$90 to US$160 per 1,000 pieces. Furthermore, we reiterate the catalyst for rubber gloves growth to be more stringent regulatory requirements, higher healthcare awareness, growing population and wider gloves users beyond medical.”

With the Covid-19 impact, HLIB Research saw that projected global demand for 2020 hovers around 330 billion gloves. Post Covid-19, it opined the normalised global glove demand growth would be at circa 13 to 15 per cent; higher than the usual eight to 10 per cent.”

Source: The Borneo Post Posted on : 08 October 2020