Glove industry faces long-term margin squeeze as global oversupply persists
To recap, the estimated annual consumption of medical gloves in the US is approximately 113 bil to 132 bil gloves in 2025, accounting for 30-35% of global glove demand.
'Based on our channel checks, Malaysia's estimated market share of medical gloves in the US has increased to approximately 60% in the first half of 2025 (1H25), compared to 44% in Dec-24,' said TA Securities.
This is driven by the US tariffs on Chinese-made medical gloves. For glove manufacturers under our coverage, Hartalega's exposure to the US market is the highest at 57%, followed by Kossan (52%), Supermax (28%) and Top Glove (26%).
We are mildly negative on the latest tariff updates as Malaysia's pricing advantage has reduced significantly against other neighbouring Southeast Asian countries.
Currently, Thailand, Indonesia and Cambodia match Malaysia rate at 19%, while Vietnam is subject to a 20% duty.
On the flip side, we expect Malaysia's market share to remain at 60% in 2025 as the tariff rates for competing nations are very similar.
However, we expect customers to continue to push back in terms of cost sharing as oversupply remains. Currently, Malaysia companies' utilisation rates are still well below the optimum levels.
For instance, Hartalega is running at 69% while Top Glove is at 61%, based on the latest quarterly numbers.
Besides that, big China glove manufacturers like Intco and BlueSail will continue to expand into Vietnam, Indonesia and Cambodia, which will result in a higher supply.
We note that Intco's Vietnam pricing is expected to be at least 15% higher than their Chinese manufacturing plants.
All in all, we believe the trade uncertainty is not over yet as tariff rates/negotiations between China and US are on-going.
We would not discount the possibility of further target price cut for stocks under coverage if China is able to get a good tariff deal. Note that China is Malaysia's largest competitor in the glove industry.
Maintain our Underweight stance on the glove sector as the global oversupply is expected to persist for at least the next three years amid increasing competition from Thailand, Indonesia and Vietnam.
We believe that the margins for the glove industry would not revert to pre-pandemic for the foreseeable future.
Furthermore, Malaysian glove players are likely to continue losing market share in the non-US markets to the Chinese manufacturers. —Aug 4, 2025
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