Singapore

ONCE lauded as pandemic darlings, glove manufacturers are in for a rough time ahead as they are forced to shutter factories in certain parts of Malaysia in line with an extended movement control order (EMCO).

Starting July 3, Malaysia imposed stricter movement curbs across 34 sub-districts in Selangor and 14 localities in Kuala Lumpur in a bid to curb the rising number of Covid-19 cases.

Glove manufacturers were previously classified as " essential services" - which allowed them to remain open during previous MCOs. The latest EMCO measures, however, have been a surprise as they do not allow glove factories to operate.

As a result, share prices of Malaysia-listed glove makers have come under pressure. Since the announcement of the EMCO on July 1, Kossan has lost 4 per cent and Hartalega has shed 3.3 per cent. Top Glove, which is dual-listed on the Singapore and Malaysia bourses, has fallen 8.1 per cent on the Singapore Exchange and 8.4 per cent on Bursa Malaysia 

The trio are likely to see their production capacities slashed. Maybank Kim Eng analyst Wong Wei Sum in a July 7 report said the latest suspension of glove factories in Selangor is expected to affect about 55 per cent of Top Glove' s production capacity, and all the production capacities of Hartalega and Kossan.

In a statement, Top Glove said it has suspended operations in the Selangor state of Malaysia in the wake of the EMCO. The group said it is awaiting clarifications from Malaysia' s National Security Council.

When queried by The Business Times, Top Glove declined to provide the exact number of factories that were affected by the latest EMCO restrictions.

Top Glove' s smaller peer Hartalega said its two factory locations in Selangor - in Bestari Jaya and Sepang - have been victims of a " full shutdown" .

As these two facilities produce all of Hartalega' s gloves, the company has sounded warnings of a " significant impact" to glove supply for both local and international healthcare value chains.

" Should the EMCO period be prolonged (to) after July 16, there will certainly be grave impact to the global supply of nitrile gloves, given that Hartalega is the world' s largest exporter of nitrile gloves," the company added in a statement.

Kossan Rubber Industries, which has factories in Selangor, said all production capacity in areas under the EMCO has been temporarily halted. As a result, the company is expecting 4 per cent of its annual production output to be affected by the EMCO.

Other Malaysian glove makers that could suffer similar setbacks include Supermax Corp, which has a manufacturing facility in Klang and the glove arm of property player Mah Sing Group, which has a manufacturing factory in Klang.

The two other Singapore-listed glove plays Riverstone Holdings and UG Healthcare, however, should be more insulated.

UGHealthcare has two manufacturing plants in Seremban, which are not affected by EMCO measures. Riverstone has more than 90 per cent of its dipping lines located mostly in Taiping, Perak, said CGS-CIMB analyst Ong Khang Chuen.

" Riverstone' s operations in Selangor are mostly for cleanroom processing, hence the cleanroom glove segment might be impacted slightly more than its healthcare glove segment during the EMCO period," added Mr Ong.

However, Riverstone on June 6 said it would temporarily close its manufacturing facilities in Perak after positive virus cases were detected among the factory workers there. Coupled with a limit on workforce capacity of 60 per cent, the group is expecting a capacity loss of some 200 million pieces of gloves or 2 per cent of its total annual production capacity.

When approached by BT for comment, Riverstone declined to do so and said the situation " remains fluid" .

The various shutdowns could hurt Malaysian glove makers in the longer term, said CGS-CIMB analyst Walter Aw, as global glove buyers find themselves with no alternative but to turn to producers in other countries such as Thailand, India and Vietnam.

" Assuming that the EMCO period is not extended beyond its July 16 expiry date, we believe the glove sector' s revenue will decline by 2.1 per cent," said Mr Aw.

But United First' s head of research for Asia Justin Tang does not see a " drastic impact" on glove supply globally.

" There will definitely be an impact on production, but it will probably not be as severe as what we saw last year given that countries around the world are getting their populations vaccinated," said Mr Tang.

He added that countries could have " stockpiled" personal protective equipment last year, which would result in reduced demand this year.