Nitrile rubber glove makers under pressure?

KUALA LUMPUR Feb 17 – At the height of COVID-19, Malaysia's rubber glove makers were at the top of their game.

Sales orders piled up non-stop for both latex and nitrile (oil-based) gloves.

But crude oil prices which is the raw material needed to make nitrile gloves are rising.

Prices of black gold which is hovering at US$94 per barrel is expected to breach the psychological barrier of US$100, its highest since 2014.

Will rising oil prices add pressure to nitrile glove producers such as Top Glove, Kossan and Hartalega?

Economist Dr Muhammad Iqmal Hisham Kamaruddin said based on previous research on the correlation between crude oil price and rubber price including for Malaysia, the price variations in crude oil have a significant influence on the price of natural rubber. However, this influence is minimal. 

The Universiti Sains Islam Malaysia Faculty of Economics and Muamalat senior lecturer said, apart from the crude oil price, other significant factors that influence the rubber price include exchange rates, time-lag, demand and supply situations and slowing growth in agricultural productivity as well as governments’ policies. 

"Similarly, the energy crisis, bad weather and international trade policy diversities made by nations of the world also influenced the prices of agricultural commodities like rubber," Iqmal told DagangNews.com recently.

He added mong the glove makers, the nitrile or synthetic glove manufacturers are mostly impacted as oil account 40-45 percent of the total operating cost of nitrile rubber manufacturers.

For natural rubber, it only account 10 percent of the cost of production of latex-based glove makers.

"So if oil prices rise any further, the nitrile rubber makers will definitely be affected," said Iqmal.

However, he added glove makers are likely to be able to pass on the higher costs to clients.

And based on the current demand for gloves globally, it will narrow the cost-profit gap among companies due to the rise of crude oil prices.

However, the real concern should be focused especially on the small-scale rubber tappers where the rising crude oil prices definitely will impact their operation cost, especially on fertilizer and transportation apart from the rising cost of living.

However, the latest Omicron figures could cushion the high oil prices.

The Omicron figures rose to above 20,000 yesterday and this should push up demand for both latex and nitrile gloves.

Nevertheless, the high oil prices will not affect all glove companies due to the diversity of their products.

Top Glove for example manufactures more latex gloves compared with nitrile.

Hartalega and Kossan manufacturers more nitrile compared to Top Glove and so they will be more affected by the high nitrile prices.

However, regardless of high oil prices, demand for nitrile gloves will always be high.

According to the US-based Data Bridge Market Research, the markets for medical nitrile gloves is accelerating because of the increasing number of latex allergies and the rising use of synthetic rubber in their production also aids in providing high strength, durability, and enhanced flexibility.

Additionally, rising occurrences of pandemic diseases, including COVID-19 and swine flu (H1N1), rising demand for infection control and increasing raw material volumes positively affect the medical nitrile gloves market. - DagangNews.com