This article first appeared in The Edge Malaysia Weekly on March 4, 2024 - March 10, 2024

Supermax Corporation Bhd deserves full marks for being transparent on the competitiveness of the glove industry. The company has stated that average selling prices (ASP) for gloves will remain suppressed as producers from China have proved to be daunting competitors. Glove producers from China are believed to have overtaken Malaysia on the global stage at least in terms of pricing, it stated in its latest quarterly results.

Under such circumstances, companies such as Supermax expect recovery to take place only next year.

Like the other glove producers, Supermax is consolidating its domestic operations and using this period of over-capacity and reduced ASP to improve the efficiency of its production lines. The company is also carrying out on an expensive expansion, setting up a plant in the US, which is the biggest consumer of gloves.

For the US venture, Supermax has set aside a budget of US$350 million (RM1.7 billion) for the first phase. As of last week, the capital committed was US$193.5 million (RM917.5 million) plus another RM42 million. Installation of machinery is expected to start this year when civil and structural works are completed.

Supermax’s US expansion is on the grounds that there would be increasing barriers to entry and higher import duties imposed in the future. Hence, domestic manufacturers would have an edge in the US against Chinese competitors.

However, the glove industry is not high-tech compared with the microchips industry where the US is sensitive to maintaining its edge in the microchip segment.

The same protectionist sentiments are not reflected in the glove industry. What happens if the US does not put up fences to help domestic glove producers in the country?

Supermax’s competitive edge of producing in the US for US buyers will erode, something that will hurt its bottom line, especially if its cost of setting up the plant in the US is high. Benefiting from high US dollar export revenue, perhaps Supermax should review the pace of its expansion in the US and maximise the potential of its plants in Malaysia instead? Malaysia is, after all, considered a neutral trade partner of the US, is it not?

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