KOSSAN: Cost Efficiencies and Volume Rebound Support Positive Outlook for Specific Glove Players

The global rubber glove manufacturing sector continues to navigate a challenging landscape marked by persistent oversupply and intense pricing pressure. However, recent developments indicate an improving cost structure and signs of a gradual volume recovery for certain players, leading some analysts to identify selective investment opportunities despite broader sector headwinds.

Cost Efficiencies and Market Trends

Analysis of the sector reveals a more favorable cost environment than previously anticipated. The 5% Sales & Service Tax (SST) on raw material imports, such as natural rubber latex and nitrile butadiene rubber, is now largely exempt for glove producers, easing a significant cost burden. Furthermore, the mandatory Employees Provident Fund (EPF) contributions for foreign workers, effective October 2025, are projected to have only a manageable impact, raising production costs by a minimal 0.1% (USD0.01-0.02 per 1,000 pieces). Raw material prices have also seen some relief, with acrylonitrile shrinking by 6.2% quarter-on-quarter and natural gas tariffs declining, further contributing to cost efficiencies. This improved cost management, alongside strategic pricing adjustments by some manufacturers, has enabled robust volume growth for certain companies, boosting overall plant utilisation. Malaysian glove exports, in particular, showed a rebound in 3Q25, with month-on-month increases of +64% in July and a slight -6% in August, driven by inventory restocking and the expiry of COVID-19 related inventories.

Enduring Challenges

Despite these positive shifts, the sector faces enduring challenges. Persistent structural oversupply, coupled with intensifying competition across US and non-US markets, continues to exert significant pressure on pricing power. The volume recovery remains uneven, and price pressure, particularly in the US, has intensified, partly due to aggressive ASP cuts by major players. Looking ahead to 2026, the implementation of a multi-tier levy mechanism (MLTM) on foreign workers is expected to increase production costs by an estimated USD0.06-0.07 per 1,000 pieces, posing another challenge to a sector already struggling with limited ability to pass on costs.

Investment Perspective

In this complex environment, the market favors efficient manufacturers with greater exposure to non-generic products, such as cleanroom gloves, which typically command more stable average selling prices (ASPs) and are relatively insulated from the ongoing price wars. While the sector has undergone a valuation re-rating, analysts generally view this as reflecting persistent structural headwinds rather than a genuine re-rating opportunity for the entire sector. However, for specific well-positioned companies leveraging cost efficiencies and strategic market penetration, there remains potential for upside. Investment bank TA SECURITIES, for instance, has issued a BUY recommendation, setting a Target Price (TP) of RM0.25, representing a 25.0% upside from the Last Traded price of RM0.20, identifying a specific opportunity within this evolving landscape.