KUALA LUMPUR (Jan 6): Kenanga Research has maintained “underweight” on the gloves sector and said the massive overcapacity in the global glove market means that low selling prices and depressed plant utilisation will likely persist throughout 2023.

In a note on Friday (Jan 6), the research house said that adding salt to the wound is the reluctance of customers to commit to sizeable orders and hold substantial stocks on expectations of further decline in prices.

“We beg to differ from the view of Malaysian Rubber Glove Manufacturers Association (MARGMA) that the industry will turn the corner in 2023 as our demand-supply forecast shows that it will take at least another two years of consistent demand growth to fully fill the current excess capacity in the industry.

“We believe that the pivot is more likely to happen in 2024 and do not have any top pick for the sector,” it said.

“We project the demand for gloves to rise by 15% in 2023, which is consistent with MARGMA’s forecast.

“However, this will do little to ease the overcapacity situation as the global glove production capacity will grow by 16% to 595 billion pieces during the year as more capacity planned by incumbent and new players during the pandemic years — enticed by super-fat margins that had eventually evaporated — finally comes on-line.

“This will result in the excess capacity rising by 22% to 137 billion pieces from 112 billion pieces in 2022,” it said.