PETALING JAYA: Top Glove Corporation Bhd anticipates a strong recovery in 2025 on the back of rising demand and redirection of orders following the United States’ implementation of new tariffs on China-made gloves.
The company, which is the world’s largest glove manufacturer, also expects its performance in the coming quarters to be driven by key factors such as the ongoing global glove stock replenishment, improved pricing power as demand rises, and supply constraints exacerbated by a shortage of foreign labour in Malaysia.
“More inflow of orders from US customers, stemming from trade diversions following the new 50% tariff on glove imports from China which came into effect on Jan 1, 2025, with a further increase to 100% by January 2026. We will see the benefits of the full impact of this tariff in 2025,” Top Glove told SunBiz via a statement.
While it is poised to benefit from the redirection of US orders from China, Top Glove expects no new expansion expected by Chinese companies due to US tariff issues. “Due to the uncertainty surrounding potential US actions, expansion by China-based manufacturers outside of China is also expected to be minimal/modest,” it said
Top Glove targets a 60% increase in sales volume for financial year 2025 and foresees improved profit margins from higher efficiency and utilisation rates.
On Jan 1, 2025, the US imposed a 50% tariff on rubber medical and surgical gloves imported from China. This tariff is set to increase to 100% by January 2026.
Despite potential fluctuations in raw material prices and exchange rates, Top Glove is confident that strong demand for gloves, coupled with supply constraints, will allow it to pass costs on to consumers.
“We expect the glove industry recovery to sustain, and for the group to deliver increasingly stronger performances in the coming quarters,” said Top Glove.
Phillip Capital Sdn Bhd equity research analyst Aiman Kamil Ahmad Shauqi said it remains positive on the rubber glove sector this year.
He noted that the industry has faced challenges in the aftermath of the Covid-19 pandemic, primarily due to an oversupply situation that led to reduced sales volumes and depressed average selling prices (ASP).
“During the oversupply period, local glove manufacturers struggled to raise ASP due to lower customer acceptance, and Chinese glove manufacturers, who used coal as a primary energy source, sold their products at significantly lower prices – resulting in a loss of market share for local producers.
“However, as inventories have been depleted and some stock has expired, local manufacturers now have room to recover,“ Aiman Kamil said.
He added that the main focus in 2025 will be on the extent of earnings recovery among glove manufacturers, sales volume trends, opportunities for higher ASP, and the timeline for recommissioning capacity.
“Investors should closely monitor developments in US-China trade tensions, as they have significant implications for the glove sector, especially with the US revising its tariff policy on rubber medical and surgical gloves.”
Regarding earnings, Aiman Kamil said both Hartalega Holdings Bhd and Kossan Rubber Industries Bhd have shown consistent operational improvements and earnings growth in recent quarters, driven by better sales volumes and higher ASP. “However, Hartalega reported losses in the latest quarter due to start-up costs related to recommissioning its new line.”
Utilisation levels among local manufacturers rose to 75–90% in second-half 2024, reflecting increased customer demand, said Aiman Kamil.
Phillip Capital channel checks suggest that recovery momentum remains positive, with ASP stabilising at US$19–22 (RM85.63-99.15) per thousand pieces, up from US$18 in 2023, and sales volume expected to grow by 5–10% in the current quarter, supported by restocking and redirected orders from Chinese manufacturers to Malaysian players.
“Local manufacturers may consider raising ASPs by 3–5% quarter-on-quarter, targeting US$22–24 per thousand pieces in 2025.”
Philip Capital maintains an overweight stance on the sector, favouring companies with strong balance sheets and significant US sales exposure to capitalise on the ongoing recovery.
“Hartalega has the largest US exposure at about 60%, followed by Kossan 45%, and Top Glove 17%.”
Aiman Kamil said the sector’s outlook remains positive, driven by continued earnings growth and favorable dynamics arising from US–China trade tensions.
“Malaysian manufacturers are expected to regain a larger global market share, potentially increasing their share to 50% (up from 35–45%), driven by order diversions and rising demand.”
Malaysian Rubber Glove Manufacturers Association president Oon Kim Hung told SunBiz that Malaysia should see demand for rubber gloves returning with some members already anticipating order shipments from their US customers to accelerate from the end of next month.
“In 2023 until the middle of 2024, our industry was challenged by global overstocking of gloves and the collapse of the ASP. Coupled with heavy competition from the region, particularly China, Malaysian manufacturers struggled but still managed to perform fairly.”
Oon said the oversupply situation is tapering off and ASP have seen improvement.
“Additionally, the US tariff on China that has come into effect since this January this year should have some impact on global trade as well as our export trade. Market direction for 2025 will continue to be dictated by developments surrounding global geopolitical tension, particularly in the Middle East, as well as the economic policies of the US under Trump administration,” he added.
Source: The Sun Daily
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