Malaysian rubber glove makers may benefit from US-China trade war

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KUALA LUMPUR: Affin Hwang Research says glove manufacturers could benefit from the trade spat between the and as a tariff is being imposed on /plastic gloves from .

Malaysian rubber glove makers may benefit from US-China trade war

The research house noted that the gloves are on the US$200bil list of Chinese goods that will be subject to a 10% import tax.

“The 10% tariff on medical gloves (rubber/ and plastic) will certainly hamper China manufacturers’ competitiveness, as gross profit margins for the efficient Malaysia manufacturers are only at 15-20%, in our view.

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“We believe that Malaysia exporters will be able to benefit from , building on their 60% market-share base,” said.

Affin Hwang noted that the US consumes 30% to 25% of the world’s medical gloves, and the introduction of the tariff will likely derail China manufacturer’s expansion plans to produce nitrile gloves in the near term.

It added that some 70% of the medical gloves exported from China into the US are vinyl gloves, with the remaining 30% being rubber/.

“We believe that the price hike would help to build a better case for distributors, which are already pushing their clients to switch from vinyl gloves to other alternatives like rubber gloves, due to the narrowing price differences.

“If China were to continue with its strict environment policy during the winter months (starting in October), we expect vinyl glove prices to rise further.”

The research house further added that it is not concerned about the “Big 4” expanding their capacity by 10% to 15% despite historical demand growth of 8% to 10% as industry players are expected to phase out their expansion plans to protect margins if needed.

It added that demand may also receive a boost from the switch from vinyl gloves.

Affin Hwang is reaffirming its overweight call on the sector with Kossan and Supermax as its preferred picks.

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