22.07.2014

www.gupta-verlag.de/rubber

MALAYSIA: Neutral outlook for rubber glove sector this year

This is especially since capacity growth by Top Glove Corp Bhd, Kossan Rubber Industries Bhd, Supermax Corp Bhd and Hartalega Holdings Bhd will be delayed or staggered.

It says Kossan's 5 billion pieces capacity will only gradually be ramped up starting from March this year for a net increase of 2.5 billion pieces in 2014.

Supermax's new plant is to commence operations by the end of the second quarter, resulting in a net incremental increase of 2.5 billion pieces.

Top Glove, on its part, is scaling back and only expects 2 billion pieces in new capacity to come onstream by end-2014, according to Kenanga Research.

Hartalega's Next Generation Integrated Glove Manufacturing Complex, meanwhile, will see commercial production by the fourth quarter, with a net incremental increase of 2 billion pieces.

"If we sum this up, the new capacity is only about 9 billion pieces, or 56 % of the estimated new global demand of 16 billion pieces,” the brokerage explains.

Kenanga Research sees a buying opportunity in the rubber glove sector ahead of an expected recovery in the coming quarters.

"From our channel checks, demand for nitrile gloves is strong. Players are generally facing full capacity constraints and have had to turn away customers.

"We gather that price competition has abated and expect margins of rubber glove players to remain stable and potentially even expand slightly in subsequent quarters.

"Overall, we believe a glut, and hence, price war in the nitrile segment is less likely, at least in the medium term, due to resilient demand and insufficient supply,” Kenanga Research points out.

PublicInvest Research says that although the perception of oversupply will weigh down on the sector, glove makers are focusing on technological and efficiency enhancements rather than just capacity growth.

"If the market were to dissect and categorise each player's individual strengths, then it would be fairly viewed and not lumped with the stigma of oversupply,” the research outfit points out.

Source: Daily "The Star", Kuala Lumpur; 5 July 2014
(Syed Rashid Ali, Karachi, Pakistan)

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