KUALA LUMPUR, July 6 — The average selling price (ASP) and earnings outlook for local glovemakers remain challenging as the United States (US) President Joe Biden is reportedly considering reducing import tariffs on Chinese goods, said Maybank Investment Bank (Maybank IB).
It said there was a high chance that the cost-plus model widely used pre-Covid-19 might no longer be relevant amidst stiff competition, adding that losses were likely if the price war escalates.
“We do not think that this is the time for bottom fishing glove stocks just yet, hence, we maintain our negative stance on the sector,” said Maybank IB in a research note today According to news reports, Biden may announce a rollback of some tariffs on Chinese consumer goods as soon as this week to counter accelerating inflation in the US.
The investment bank opined that the potential tariff removal on Chinese consumer goods — including gloves — will be a negative event for the Malaysian glovemakers.
“Being one of the essential items (amidst the Covid-19 pandemic and rising Monkeypox cases), and given the insignificant involvement of US companies in glove manufacturing, there is a high chance that there will be a removal of import tariffs on China-made gloves,” said Maybank IB.
To expand their market share, Chinese glovemakers have been selling at lower prices and absorbing the tariffs for their clients, even when they are currently being taxed at 7.5 per cent.
“Without the import tariffs, there will be more room for the Chinese glovemakers to adjust their pricing and that could lead to further cut in ASP.
“We were told that the Chinese glovemakers are currently selling below US$20 per thousand pieces compared to Malaysian makers’ of around US$22-24 per thousand pieces,” said Maybank IB.
At 11.45am, glove producers Kossan added one sen to RM1.27, Rubberex was flat at 50.5 sen, Top Glove and Supermax eased one sen each to 93.5 sen and 81 sen, respectively, while Hartalega shed eight sen to RM2.64. — Bernama