LAST week, US President Joe Biden announced a significant increase in tariffs on Chinese products, including rubber medical and surgical gloves. The import tariff on Chinese-made rubber gloves will rise to 25% by 2026 from the current 7.5%.
This increase is part of a broader set of tariffs on US$18 bil (RM84.64 bil) worth of Chinese imports, reflecting Washington’s strategy to protect US industries from perceived unfair competition.
Investors predict that the tariff hike will prompt US customers to seek alternative sources for rubber gloves outside of China. Biden’s announcement sparked a rally among the Big Four glove manufacturers on Bursa Malaysia with Top Glove Corp Bhd leading the charge.
The world’s largest glove maker by capacity surged 31.3% or 30 sen to RM1.26, its highest level in two years, just before last Wednesday’s (May 15) closing bell. Shares of Hartalega Holdings Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd also soared and were among the day’s top active/gainer stocks.
On the same day, shares of smaller glove manufacturers also posted significant gains. Comfort Gloves Bhd closed at a nearly a two-year high of 56 sen while Hextar Healthcare Bhd (formerly Rubberex Corp (M) Bhd) edged up 15.22% to close at 26.5 sen.
Meanwhile, Careplus Group Bhd rose by 24.59% to close at 38 sen, its highest level since January 2024.
Investors turn blind eye at Zen Tech
In contrast, Zen Tech International Bhd (formerly Inix Technologies Holdings Bhd) with its seven rubber glove production lines, saw its share price lagging behind its peers by remaining stagnant at 1.5 sen. This is despite ZenTech having an annual maximum production capacity worth RM85 mil.
Did investors overlook ZenTech? Will ZenTech catch up this week?
Despite its stagnation, Zen Tech remains a potential candidate for growth. Investors may have initially overlooked ZenTech due to its smaller scale compared to industry giants. However, its production capacity and the overall market trend suggest that it could still benefit from the increased demand for non-Chinese gloves.
The coming weeks will be crucial for Zen Tech as it positions itself to capture a share of surging US demand. Strategic moves such as ramping up production, improving operational efficiency or forming strategic partnerships could help ZenTech join the rally and enhance its market standing.
The US tariff hike on Chinese rubber gloves has set the stage for a bullish trend among Malaysian glove manufacturers.
While major players like Top Glove, Hartalega, Kossan and Supermax already seen significant gains, the potential for smaller manufacturers, including ZenTech, to benefit remains high. Investors should watch closely to see how these companies capitalise on the new market dynamics.
Implication of new tariffs
With the tariffs going to increase the cost of Chinese gloves, Malaysian gloves will become more attractive to US buyers due to the reduced-price gap.
This presents an opportunity for Malaysian glove manufacturers to regain market share lost to Chinese competitors since the price war that began in 2021. Chinese glove makers are the primary rivals of Malaysian companies in the export market for rubber gloves.
The average selling prices for Chinese gloves are expected to increase to US$20-US$21.25 per 1,000 units from the current US$16-US$17 due to the tariff hike. This price increase could narrow the gap with Malaysian-made products which currently sell at US$20 per 1,000 units and are not subject to US import tariffs.
Malaysian Rubber Glove Manufacturers Association (MARGMA)president Oon Kim Hung had stated last Wednesday (May 15) itself that about 35% of Malaysian rubber glove exports go to the US market, contributing approximately RM4 bil in 2023.
This tariff change could further strengthen Malaysia’s position in the US market, providing a significant boost to the industry. – May 20, 2024
Wan Mohd Farid Wan Zakaria is a lecturer at the Faculty of Management & Business, Universiti Teknologi MARA (UiTM).
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
