KUALA LUMPUR (Sept 20): The upcoming increase in US tariffs on China-made gloves provides an opportunity for Malaysian players to increase production, said Top Glove Corp Bhd (KL:TOPGLOV) managing director Lim Cheong Guan.
Malaysian players are “able to increase our production” to meet US demand should the tariffs result in a supply vacuum from China, Lim told reporters at a media event on the progress of the glove maker’s water management system improvements.
Some 20% of the group's total sales are to the US, Lim said.
That said, Top Glove has no plans to add exposure to the US via manufacturing facilities like some of its competitors, he added.
"Unless the US government would subsidise for emergency purposes, expansion would be unlikely, predominantly because the operating environment would be difficult,” he said.
“The cost of production is three or four times more expensive than in Malaysia as well. Therefore, commercial wise, it is not practical,” Lim added.
US regulators this month announced that tariffs against China-made medical gloves will be raised to 50% next year, from 7.5% currently. In 2026, it will be increased to 100%.
While the tariff issue is not affecting Malaysia-made gloves, the local glove manufacturing industry is one of several industries which previously faced hiccups in the US, as products were halted from being brought into the US due to forced labour allegations.
Companies like Supermax Corp Bhd (KL:SUPERMX), whose sales in the US comprised 29% of total sales, have opted to manufacture their products within the US beginning next year.
Malaysian glove maker shares have been back in vogue recently following the US-China tariff announcement. This added to renewed sentiment on the sector amid the recent global outbreak of monkey pox.
However, analysts are expecting any heightened demand arising from stockpile activities ahead of the US-China tariff rise to support prices and sales volume only for the short term, as global capacity surplus remains post the Covid-19 pandemic boom.
At the time of writing, Top Glove shares were up seven sen or 6.73% at RM1.11, giving it a market capitalisation of RM9.11 billion.