This article first appeared in The Edge Malaysia Weekly on May 26, 2025 - June 1, 2025

RECENT optimism about Malaysian glove makers following the steep reciprocal tariff imposed on China’s products to the US has faded quickly in the last two weeks.

Hopes of better prospects for domestic glove makers waned because the US additional import tariff on Chinese-made rubber gloves was slashed to 30% from the 145% announced in April during the reciprocal tariff truce period of 90 days between the US and China.

As a result, the yawning gap between prices narrowed.

Some analysts chose this time to downgrade the sector, painting a bleak picture of intense competition amidst excess capacity — issues that have existed after the Covid-19 pandemic and which are expected to linger for the foreseeable future.

Most research houses are now “neutral” on the sector.

Chinese glove makers were already paying a 50% tariff that was imposed by the Biden administration, and when added to Trump’s imposition, the tariff now totals up to 80% and 58% respectively for medical and non-medical disposable gloves.

In contrast, the exports of Malaysian manufacturers to the US are subject to a 10% tariff for now.

However, is the sector necessarily worse off than it was earlier in the year?

Malaysian Rubber Glove Manufacturers Association president Oon Kim Hung remarks that Malaysian rubber glove manufacturers are not new to competition from China and other glove-producing nations.

“So far, no members that we know of have been adversely affected. As we know, exports are ongoing for our members. Gloves are always needed as they are essential items and will continue to be needed as the economy improves and healthcare progresses,” he says, adding that Malaysian glove makers are seasoned players in the game and have been preparing as best as they could for the competition they face in non-US markets as well.

Top Glove Corp Bhd (KL:TOPGLOV) tells The Edge that its stakeholders are taking a short-term view at the moment.

“The current tariff situation is fluid with continued uncertainty about the timing and future developments. In such a climate, we are seeing our customers, suppliers and stakeholders focusing on meeting short-term requirements as they navigate shifting conditions.

External factors like tariffs are beyond our control, so our focus remains on what we can control,” says Top Glove, adding that it is focusing on cost efficiency and diversifying manufacturing operations and customer base.

Supermax Corp Bhd (KL:SUPERMX), which has operations in the US, is cautious about its prospects.

In its quarterly earnings announcement last week, Supermax highlighted the Chinese manufacturers’ front-loading activities in the last quarter of 2024 for shipments to the US. It anticipates that the Chinese glove makers will turn their attention to the non-US market, driving down the average selling price (ASP), which will become “very challenging for Malaysian manufacturers”.

Supermax expects the US market to take about six to eight months to absorb the excess inventory from earlier front-loading activities. But it sees early signs of improvement in the US market as excess stocks deplete.

Note that the US glove market is big for Malaysian manufacturers who dominate about 47% of the US rubber glove market, according to Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz.

Supermax suffered a net loss of RM93.36 million for the cumulative nine months ended March 31, 2025 (9MFY2025) on revenue of RM627.11 million. The company has been loss-making since its FY2023.

Analysts estimate that Supermax will post a loss in its FY2025 ending June 30.

Fortress Capital CEO Thomas Yong reckons that the ASP gap between Malaysian and Chinese gloves shrank from US$21 to just US$4 per 1,000 pieces during the reciprocal tariff pause.

Yong says while the Malaysian players may have retained a modest edge in prices, the risk lies in what perception the buyers may have.

“Buyers may begin to reassess sourcing strategies, especially if the current tariff structure extends beyond the set time frame of 90 days. While it is not immediately disastrous, the sector’s outlook has become increasingly uncertain due to the narrowing ASP gap, pricing pressure from China and with US buyers potentially delaying purchases due to policy ambiguity,” he adds, noting concerns about global overcapacity.

Maybank Investment Bank Research downgraded the sector to “negative” from “neutral” on May 13. It is worried about the new capacity of Chinese glove makers who have set up operations in Southeast Asia — as an answer to exports to the US — coming on stream next year, which will further intensify competition.

According to Maybank IB, Malaysian glove makers are losing market share in non-US markets to the Chinese players.

While some are concerned about the heightening uncertainty, others opine that the industry landscape has not changed structurally even with the present tariff rates.

“We don’t think the outlook has changed much as nitrile gloves coming directly from China are still not competitive after tariffs. And Chinese gloves selling at lower prices than Malaysian gloves in non-US markets has been a concern all along. It is not that Malaysian glove manufacturers are not competitive but China manufacturers are more willing to cut prices and for longer,” opines TA Investment Management chief investment officer Choo Swee Kee. Choo has a “neutral” call on the sector.

Kenanga Research shares the view, saying that fundamentally, there are no changes in the glove sector at current tariff levels, only negative newsflow on sentiment.

“We don’t see a fundamental view change of the glove sector at these tariff levels. Buyers have been diversifying sources as a risk management strategy, opting to purchase from other countries, including Malaysia,” says Kenanga Research in a May 13 report. It has an “outperform” call on Hartalega Holdings Bhd (KL:HARTA) with a 12-month target price of RM3.20.

The newsflow has definitely affected sentiment. As at May 21, the big four glove stocks had lost nearly all the gain made in their share prices since the Liberation Day announcement. The prices are currently flirting near their five-year low levels.

It is worth noting that the earnings and margins of glove makers have not normalised since the super profit years of the Covid-19 pandemic. Revenue has not returned to pre-pandemic levels either with most companies reporting lower revenue than a decade ago.

In fact, operating margins, which were in the teens before the Covid-19 pandemic,  and in Hartalega’s case, hovering between 19% and 22%, fell into negative territory after the pandemic as they incurred operating losses. Kossan Rubber Industries Bhd (KL:KOSSAN) and Hartalega have returned to positive operating margins.

Kossan made an operating profit of RM114.4 million in its financial year ended Dec 31, 2024 (FY2024) on revenue of RM1.9 billion. Its operating margin was 5.9%.

Net profit amounted to RM118.3 million, implying a net margin of 6.18%.

In FY2016, Kossan’s operating margin was 12.9% while net profit margin was 10%.

In its current financial year, Kossan’s net profit grew 13% to RM35.65 million in 1QFY2025 while revenue rose 8% to RM487.35 million.

Kossan has a technical rubber product division as well as a clean room division but the rubber glove division is still the biggest contributor to revenue and profit.

Even Hartalega, which industry experts say is one of the most efficient glove makers in town, has seen an erosion in operating margin since the pre-pandemic days. In the four financial years running up to the pandemic, (FY2017 to FY2020), the company’s operating margin averaged 20.16%.

Hartalega closed its FY2025 ended March 31 with an operating profit of RM53.2 million and an operating margin of 2.05%. It made a net profit of RM74.5 million on revenue of RM2.59 billion. Net profit was propped up by recognition of tax asset amounting to RM26.46 million.

Analysts expect FY2026 to be a better year for Hartalega, with consensus on Bloomberg estimating revenue to average RM2.95 billion while net profit is expected to more than double to RM173 million. Operating margin is also expected to improve to around 7%.

Meanwhile, Top Glove is expected to finally recover from its losses in FY2025, based on analyst estimates. The company was loss-making in FY2023 ended Aug 31, and FY2024.

For the cumulative six months ended Feb 28, 2025, Top Glove made a net profit of RM35.76 million on revenue of RM1.77 billion.

Some hold the view that it is hard for glove makers to command the margins they used to in the past, simply because of aggressive capacity expansion in recent years and new entrants during the Covid-19 pandemic.

“We are ‘neutral’ on the sector. The industry players are facing intense competition from each other and there is an oversupply situation now. However, the glove industry is a strategic business that can turn around quickly whenever the need arises,” says Choo.

Yong of Fortress says a cautious approach is needed for those thinking of investing in the sector.

“Unless there is a strong, long-term belief in a sector turnaround or consolidation, it may be prudent to hold off on new investments at this time,” he opines. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.