,New kid on the block Hong Seng Consolidated Bhd’s executive director Lester Chin not only believes that ASPs should remain above pre-pandemic levels, he also says that demand should continue to remain strong.
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AMID the market’s concerns about the average selling prices (ASPs) of gloves coming down after enjoying a spectacular run, glove players say they are confident that ASPs will remain above pre-Covid 19 levels.
New kid on the block Hong Seng Consolidated Bhd’s executive director Lester Chin not only believes that ASPs should remain above pre-pandemic levels, he also says that demand should continue to remain strong.
“There are cyclical spikes of the virus worldwide and this may be due to the effect of vaccines wearing out before boosters are administered in each country.
“We also see increasing usage of gloves in more sectors and industries as part of the new norm. One example is the food industry which is perhaps the largest industry in the world as everyone has to eat,” Chin tells StarBizWeek, explaining why he thinks demand for gloves will remain steady.
His sentiment is shared by some glove analysts.
Drawing information from the world’s largest glove maker Top Glove Corp Bhd, Kenanga Research tells clients in a report that there has been an acceleration in the overall market’s ASP normalisation.Top Glove HQ
“From Top Glove Corp Bhd’s fourth quarter for financial year 2021 results briefing recently, we gather that its ASPs have dropped faster than expected at 31% quarter-on-quarter to US$48 (RM201) per 1,000 pieces,” it says.
However, while the research house is not able to quantify as to how low ASPs will go, it says, citing glove manufacturers themselves, that ASPs are unlikely to go below pre-Covid pricing as the industry’s cost structure had risen especially with regards to social compliance and nitrile feedstock costs.
“Post Covid-19, the inventory restocking cycle is expected to spur demand coupled with increased usage arising from new users and higher hygiene awareness,” Kenanga adds.
The research house points out that expectations of “disappointments” in the coming quarters are capped for the glove sector, considering ASPs are expected to normalise by next year, instead of 2023 as earlier expected.
“Since ASPs are no longer lofty, expectations of disappointments in subsequent quarters are expected to be capped,” it adds, maintaining its “overweight” call on the sector.
Meanwhile, Hong Seng’s Chin says over the short-term, glove supplies from China may face problems due to issues such as power rationing and power supply crunch in the country.