US tariff hike on Chinese gloves: A boon for M’sian glove manufacturers?

MALAYSIAN Rubber Glove Manufacturers Association (MARGMA) president Oon Kim Hung has acknowledged that while the news may appear favourable for Malaysian rubber glove players, he cautioned against expecting immediate effects, as the tariff hike is slated to take effect in 2026.

“Though the news may bode well for Malaysian rubber glove players, we do not expect much immediate impact, as it will only take effect in 2026.

“About 35% of our rubber glove exports are to the US market, contributing approximately RM4 bil in 2023,” Oon pointed out with regard to the recent decision by the US to raise tariffs on Chinese rubber medical and surgical gloves.

However, he also noted the importance of considering the US’ own domestic production capacity in the equation.

“We should not forget that the US also has its own domestic production. We believe that Malaysian producers should continue to invest in ESG (environmental, social and governance) matters, and the way forward is to establish sustainable and equitable prices.”

Moreover, glove stocks surged today with Hartalega Holdings Bhd leading the rally, jumping 86 sen or 29.05% to close at RM3.82. The boost which follows the US decision to hike tariffs on Chinese gloves to 25% by 2026, has also prompted upgrades from Maybank IB Research for Hartalega, Top Glove Corp Bhd and Kossan Rubber Industries Bhd.

Analyst Wong Wei Sum anticipated the tariff increase to bridge the price gap between Malaysian and Chinese gloves, making Malaysian products more appealing in the US market.

“This higher tariff is expected to close the price gap between Malaysia and Chinese gloves, thus making Malaysia gloves more price attractive in the US (a key export market). Our order of preference are Hartalega, Top Glove and Kossan.”

Furthermore, the move aims to counter Malaysian glove makers’ declining market share to Chinese counterparts due to a price war since 2021.

“While there is a risk that Chinese glove makers may shift their focus to the European markets (Top Glove: 35% of sales, Hartalega: 25%), we believe Malaysian glove makers will be able to compete, especially after a few rounds of cost rationalisation and decommission exercises over the last two years that have led to better cost efficiency,” added Maybank IB Research.  – May 15, 2024

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