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PETALING JAYA: Global demand for gloves is likely to continue to outpace supply for the next three to four years, even if a vaccine for Covid-19 is available, according to Hartalega Holdings Bhd
.
The world’s largest manufacturer of nitrile gloves says glove consumption around the world will continue to increase due to changes in user behavior.
Speaking at a press conference after the group’s AGM yesterday, Hartalega CEO Kuan Mun Leong said that the Covid-19 pandemic has changed user behavior and that is increasing the demand for gloves.
“Demand in developed countries has increased by 30%, while in developing countries, demand has more than doubled,” Mun Leong said.
Due to the increased hygiene and safety awareness, there is now a structural increase in glove use, he said, adding that this is the reason why the medium-term outlook for glove demand will remain strong.
The industry, he said, is currently facing a major shortage, with about 120 billion pieces of gloves as additional demand.
“This demand can only be satisfied in three years,” Mun Leong said, adding that the industry will not see an oversupply in the next three to four years even though players are actively increasing their production capacities.
Mun Leong noted that without the pandemic, global demand for gloves generally expanded at an average of 8% to 10% per year.
Meanwhile, Hartalega CEO Kuan Kam Hon said the company was constantly expanding at an average rate of around 20% per year, which was slightly more than the industry’s organic growth.
“For us, the situation for the next three years is that the supply does not meet the demand,” said Kam Hon.
“Even if we have additional gloves for the fourth year, it is dedicated to creating inventory. When there is a shortage of supplies, you cannot create inventory, ”he added.
On expanding capacity, Mun Leong said Hartalega was accelerating growth through its Next Generation Glove Manufacturing Complex (NGC) to meet demand.
“To date, we have commissioned 10 of the 12 production lines for plant six, while for plant seven, the first production line is on track to be completed in October 2020,” Mun Leong said.
The group recently acquired 24.23ha of land in Sepang, Selangor, adjacent to its NGC plant seven, for RM 158,000.
The group plans to build four new plants on that land with an investment of RM1.5bil.
“The first line will start production in October 2021,” Mun Leong said.
Upon completion, the four new plants would add 19 billion pieces per year in installed capacity.
Furthermore, Hartalega is expected to invest RM3bil for its next phase of expansion, codenamed NGC 2.0, to build seven factories on 38ha in Banting, Selangor. The first production line is expected to go into operation in the first half of 2022.
Mun Leong said that once fully completed by 2027, Hartalega’s expansion plans would see the group’s total annual installed capacity increase to 95 billion pieces per year.
Hartalega’s net profit more than doubled to a record 219.7 million ringgit for the first quarter ended June 30, 2020, while revenue increased 44% year-on-year to 920.1 million ringgit.
Mun Leong said that Hartalega is expected to continue to post better results in the coming quarters, supported by higher average sales prices due to strong global demand for gloves.
Glove prices, he said, are now three times higher than in the days before Covid-19.
In this quarter alone, spot prices for gloves were up 30% and I expected them to increase 40-50% in the next quarter.
Hartalega shares rose RM1.10 to close at RM14.10 yesterday.
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