MALAYSIA: Rubber glove firms gain from sliding latex prices, stronger USD

A HwangDBS Vickers Research analyst said the price of rubber per kilo had fallen in the past week to RM8.10 from RM8.50.

"Coupled with stable demand, this would translate into lower raw materials costs,” she said.

On demand, HwangDBS said in a recent report that medical gloves usage in the healthcare industry (which accounts for 75% to 80% of total gloves consumption) was resilient.

"We see a weak correlation between gloves demand and gross domestic product (GDP) growth.

"The United States, which is the largest gloves importer (35% of global imports), has been seeing an uptrend in total healthcare expenditure as a percentage of GDP since 2000.

"The United Kingdom and major European countries are experiencing similar trends, and we expect other countries to raise their hygiene standards eventually,” it said.

Meanwhile, OSK Research said it saw Top Glove and Supermax as the main beneficiaries of the fall in latex prices because they were the biggest users of natural rubber latex.

"At about RM8.50 per kilo, latex cost makes up about 60%70% of their total cost.

"Going forward, we are expecting latex prices to gradually fall, in line with the expected fall in other commodity prices, following the global economic slowdown.

OSK Research also said the strengthening of the US dollar would translate into higher sales for glove makers.

At press time, the ringgit was at RM3.20 against the greenback.

Source: Daily "The Star", Kuala Lumpur; 5 Oct 2011

(Syed Rashid Ali, Karachi, Pakistan)