Supply shortage for gloves
PETALING JAYA: The market’s anticipation of the average selling prices (ASPs) of gloves normalising is already happening but that does not discount the fact that there remains a shortage of gloves.
Adding to this shortage is the possibility that Covid-19 cases, which had caused a surge in the demand and hence price of gloves before this, could continue to peak due to new variants of the virus. Hence, some analysts are not downgrading the glove sector as yet.
“New variants and winter months a potential wildcard, ” Hong Leong Investment Bank’s (HLIB) research unit said in a note to clients.
The research house said vaccination rates in key markets were progressing well and noted that the United States and the United Kingdom had begun relaxing lockdown rules and allowing large scale gatherings.
“Despite this, there is growing evidence that vaccines may be less effective against new variants, particularly the Delta variant.”
It pointed out that while Covid-19 daily cases had on the whole declined in the United States, the Delta variant had roughly doubled every two weeks in the United States.
“Coupled with the findings that Covid-19 is more active during winter months, we reckon it is too early to rule out the possibility of Covid-19 cases rising in key markets again in the coming months, which would inevitably increase the demand for disposable gloves, ” HLIB said.
It said despite the decline in ASPs, supply shortage for disposable gloves still remained, with the crunch expected to last until 2023 before supply catches up with glove demand.
Premised on these, the research house has maintained its “overweight” call on the glove sector.
However, it also said the recently imposed extended lockdown mandates that glove manufacturers operate at 60% workforce capacity from June.
“Furthermore, the government’s National Recovery Plan, phase 2 and 3 (July-October 2021) continues to mandate that manufacturers operate at below full capacity.
“As such, we expect sales volumes in the second half of 2021 to remain sluggish.”