Post-pandemic, China’s cost competitiveness, coupled with the huge step-up in global glove manufacturing capacity, sent prices and utilisation rates for Malaysian glovemakers sharply lower, from record profits to losses. The imposition of sharply higher tariffs on Chinese imports by the US has provided some relief, allowing Malaysian producers to regain market share in the world’s largest economy.
For context, the US Trade Representative announced in September 2024 a 50% tariff on Chinese-made gloves effective Jan 1, 2025, that will further increase to 100% in 2026. Data shows that adjustments have already taken place over the last two quarters. Chart 2 shows a significant surge in glove import quantity from China and Malaysia in 4Q2024 — a clear reflection of front-loading activities in anticipation of the tariffs. After the 50% tariff on Chinese-made gloves came into effect, import volumes from China fell sharply, while Malaysia’s market share in the US rose, back to roughly 60%.
Correspondingly, Malaysian glovemakers reported improved utilisation and volume sales (see Chart 3). Adding on Trump’s 145% reciprocal tariffs in April, import duties on Chinese gloves rose to 195% and then fell, with the latest temporary truce, to 80%. Regardless of where tariffs end up after the 90-day pause, additional market share gains for Malaysia will be small, given that Chinese glove sales to the US had already fallen sharply, to even below pre-pandemic levels (see Chart 4). As US glove stockpile depletes, Malaysian glovemakers anticipate a pickup in orders in the second half of 2025. The question, though, is whether this trend is sustainable and, more importantly, what is the outlook for Malaysian glovemakers?
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Can Malaysian glovemakers regain global market share?
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Chinese glovemakers are ultra cost competitive — able to maintain higher profit margins, on average, than their Malaysian peers, despite consistently selling at lower prices (see Chart 5). What enabled Chinese glove manufacturers to gain traction so swiftly in a market long dominated by Malaysia? Can Chinese manufacturers shift their production abroad, avoiding US tariffs while still maintaining these advantages to compete with Malaysia?
The answer to China’s rapid market share gains lies in a combination of factors — economies of scale, state policy support and structural cost advantages. China had to rapidly ramp up production of gloves out of necessity during the pandemic to meet domestic demand. Economies of scale is China’s superpower, whether the product is gloves, electric vehicles (EVs) or something else. Another critical factor to China’s global manufacturing success is its integrated supply chain, from raw materials to end-product production, and highly efficient logistics — that is, an entire ecosystem. For instance, Intco Medical Technology, China’s largest glove company, sources more than 80% of its nitrile latex — raw material accounts for 42% of production costs — in-house. This shields the company from fluctuations in nitrile latex prices, allowing for greater cost stability and predictability in production. In addition, Chinese glovemakers use predominantly coal for fuel, which is cheaper than natural gas, which is used by most Asean producers (see Chart 6 for a comparison of the individual cost components for Chinese and Asean gloves producers).
To a certain extent, therefore, the efficiencies of China’s supply chain ecosystem and cheap fuel mean that it is not simply a matter of Chinese glovemakers relocating production to another country to circumvent US tariffs. Doing so would mean forfeiting key benefits such as lower energy costs and proximity to integrated raw material processing facilities.
Having said that, it may not need to. We have no doubt Chinese glovemakers will pivot from the US market to the rest of the world, where its presence is currently smaller. This would simply result in a market share swap between Malaysia and China, with Malaysia gaining share in the US at the cost of declining volumes elsewhere. The US currently accounts for about 30% of global glove demand, of which 32% was imported from China in 2024. In other words, less than 10% of global demand is affected by US tariffs, making it relatively easy for Chinese manufacturers to reallocate their displaced volume to other markets. And although the US market has long been viewed as more favourable because of its premium import price relative to other regions, it remains uncertain whether this trade-off will deliver a net long-term gain for Malaysian producers.
Whether Malaysian glovemakers can compete in the global market will ultimately depend on their ability to further improve scale and productivity as well as margins while adjusting to shifting global trade patterns.
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Malaysia’s own historical dominance in the global glove market stemmed from having cheaper costs — namely, subsidised gas (fuel), electricity and water as well as cheap foreign labour. But all these costs have increased significantly, with the rollback of subsidies and increase in minimum wages (from RM900 a month in 2014 to the current RM1,700, plus 2% mandatory EPF [Employees Provident Fund] contribution). Case in point: Despite improving sales volume, particularly in the US market since 4Q2024, profitability remains under pressure (Chart 7 shows that Ebitda [earnings before interest, taxes, deprecation and amortisation] margins of all major players are still well below pre-pandemic levels). Notably, Chinese glovemakers have continued to operate near full capacity even as most Malaysian firms cut utilisation rates, under pressure from industry oversupply and excess inventories at the end-user level. Most Malaysian glovemakers are still operating below optimal utilisation levels (80% to 90%).
The Malaysian glove industry’s investment appeal ultimately hinges on its ability to improve margins substantially, and soon — an outcome that, in current market dynamics, appears unlikely. Significant and sustained glove price increases is unrealistic in an intensely competitive landscape, and opportunities for cost optimisation are limited. There remains substantial idle production capacity in the system, while organic glove demand is steady but relatively slow, barring another pandemic event.
Kossan Rubber Industries and Hartalega Holdings, the two Malaysian glove companies with the highest exposure to the US market — which account for 45% and 60% of sales respectively, are trading at forward PE ratios of around 50 times, assuming slightly improved Ebitda margins at 10% on the back of higher production. In a nutshell, prevailing valuations remain too high to justify a fundamentally driven investment case for Malaysian glovemakers.
The Malaysian Portfolio traded marginally higher, up 0.1% for the week ended May 21. Shares in United Plantations and Kim Loong Resources gained 0.8% and 0.4% respectively; Insas Bhd – Warrant C was unchanged from the previous week. Total portfolio returns now stand at 185.7% since inception. This portfolio is outperforming the benchmark FBM KLCI, which is down 15.6% over the same period, by a long, long way.
The Absolute Returns Portfolio, on the other hand, fell 0.8% last week, paring total returns since inception to 22.8%. The top three gaining stocks were SPDR Gold (+4.3%), US Steel Corp (+0.8%) and Berkshire Hathaway (+0.7%). The big losers were Alibaba Group Holding (-5.9%), Trip.com (-3.9%) and Goldman Sachs (-3%).
Tong’s AI Portfolio also ended lower for the week, down 0.5% and paring the total return since inception to 0.6%. The top gainers were RoboSense Technology (+5.3%), SAP (+3.4%) and Twilio (+1.1%), while the notable losers were Horizon Robotics (-5.9%), Workday (-4.5%) and Intuit (-1.2%).
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor's particular financial situation, investment objectives, investment horizon, risk profile and/ or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
