MIDF maintains positive on glove sector

06 May 2015 / 05:37 H.

    PETALING JAYA: The export value of rubber gloves in February 2015 maintained its uptrend and increased by 18.2% year-on-year (y-o-y) to RM916 million due to the stronger US dollar against the ringgit earlier this year.
    However, MIDF Research said the export volume for rubber gloves fell 10.9% from a year ago to 47,395 tonnes due to increasing demand of thinner specification gloves from overseas customers.
    "In 2014, Malaysia's exports of rubber gloves increased by 7.1% y-o-y to 95.4 billion pieces, whereas its export volume decreased by 18.1% to 692,000 tonnes. Out of the 95.4 billion pieces, 50.4% consists of natural rubber gloves and 49.6% consists of nitrile rubber gloves," it added.
    MIDF said the price of Malaysian rubber improved by 6.8% year-to-date, which would increase the low average selling prices of gloves, enhancing revenue for the glove makers.
    In addition to that, the price of rubber traded in regional markets such as Vietnam, Thailand and India has also shown positive improvements, MIDF Research said.
    "Going forward, we are expecting the price of rubber to further appreciate gradually as signals of rubber supply tightening from Thailand is being seen. Thailand is the world's largest natural rubber producer. The tightening of rubber supply is attributable to the loss incurred by the Thailand government for the past three years due to the low rubber price," it said.
    MIDF Research said the bulk of the demand for rubber is expected to continue to come from China, the main rubber consumer.
    It also pointed out that due to the fall in crude oil price last year, nitrile rubber prices have also declined as the main constituent in nitrile rubber composition is derived from petroleum.
    "Due to this, average selling prices (ASP) for nitrile gloves has also experienced a dip as customers request for lower glove prices.
    "As such, with our house's expectation of the Brent crude oil price to improve up to an average level of US$60-70 (RM215.70-RM251.70) per barrel in 2015, we can also expect the price of nitrile rubber to improve, thus, increasing the ASP for nitrile rubber gloves," it said.
    MIDF Research is maintaining a 'positive' call on the glove sector as it expects raw material price to increase slightly in the near-term due to the restricted supply of rubber from Thailand, increasing demand from China and rebound in crude oil prices.
    Hence, this would widen the door of opportunity for glove manufacturers to enhance their average selling prices.
    "The International Rubber Study Group also expects the world demand of rubber to increase by 3.5% in 2015. Moreover, the Rubber Economist expects global production to outstrip demand in 2015 by 43,000 tonnes. As such, we are still sanguine on prospects of the local glove industry.," MIDF added.


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