KUALA LUMPUR, Sept 7 — Hartalega Holdings Bhd is confident of remaining competitive in the global glove market, driven by its automation and digitalisation exercise, despite the aggressive expansion of China’s glove manufacturing companies.

Chief executive officer Kuan Mun Leong said the company had developed an auto packing machine that could reduce between 17 and 20 per cent of its manual labour within the next three years, ensuring the company would remain competitive in the glove sector.

"China is aggressively expanding its glove production capacity. From a competition perspective, it is important that Malaysia as a country continues to provide a conducive operating environment, especially for the glove sector, as Malaysia is the global champion.

"Malaysia has been leading globally in the glove supply as we command over 60 per cent of the global supply. It has always been a competitive industry; we are used to competition,” he told a virtual media briefing after the company’s annual general meeting today.

He said glove manufacturers in China had set ambitious expansion plans and Hartalega had to take competition from the republic into consideration as part of its strategic plan for the organisation.

"From 2019-2022, it is expected that China will add 136 billion pieces of gloves while Malaysia will add capacity no less than China, about 223 billion pieces during the period. Although Malaysian manufacturers are adding capacity, China is also very aggressively adding capacity.

"China (glove manufacturing) growth is averaging about 59 per cent per annum between 2019-2022 while Malaysia is at 28 per cent growth. China is growing (percentage-wise) quicker than Malaysia because they started from a smaller base,” he said.

By the end-2022, Kuan said, China was expected to have a 23 per cent share of the global supply and Malaysia about 60 per cent based on the announced expansion numbers.

"However, these expansion plans can change. Right now, what is happening in the market is there is a downtrend in average selling prices (ASPs).

"Buyers reduce their orders and adjust inventories. They don’t want to carry high costs of inventories. In view of this, the Chinese manufacturers are also slowing down their expansion and Malaysia is also slowing down our expansion partly due to Covid-19 restrictions as construction projects are not allowed to resume,” he said.

Moving forward, Kuan said, Hartalega’s focus was to build new factories and accelerate the implementation of automation and digitalisation while focusing more on research and development (R&D).

"I don’t see Malaysia losing its leadership position in the near term, and as a major global glove producer in the near and medium terms. In the longer term, it depends how we make ourselves be competitive by going into automation and R&D for product innovation.

"Also, the operating environment in Malaysia has to be conducive for the country’s glove sector to continue to lead the world.

"We need to have clarity on foreign labour policy as the pandemic has caused certain disruptions to our operations. Having clarity on the recovery plan and how it will impact the sector is important,” he said.

Kuan said at present, Malaysia was the global champion with a complete ecosystem of supporting industry, services and engineering expertise in the country that supported the glove sector.

He said there were a total of 400 companies that supported the glove ecosystem.

To meet the increasing global demand moving forward, he said, Hartalega’s expansion plans would continue to progress strategically as the company remained conscious of market demand and supply dynamics driven by its Next Generation Integrated Glove Manufacturing Complex (NGC) and NGC 1.5 in Sepang, Selangor.

"Currently, eight out of 10 lines of Plant 7 of the NGC have been commissioned. Once fully completed, this will add a further 2.7 billion pieces to our annual installed capacity,” he said.

Meanwhile, he said NGC 1.5 would contribute an installed capacity of 19 billion pieces of gloves annually once completed with four manufacturing facilities, bringing the company’s total annual installed capacity to 63 billion pieces over the next three to four years.

On the ASP, which has been dropping for about 30 per cent currently, Kuan said the company foresaw the situation would be normalised by the first quarter of next year before continuing to move higher, at least higher than the pre-pandemic period as the cost structure had changed.

"We are experiencing an issue of cost from social compliance and also the material cost that we are paying to date is actually higher. The ASP will be higher but margin will normalise by the end of the year or by early next year. It will be pretty normal.

"As for the ASP, we think the reasonable price would be above US$30 (US$1=RM4.14) per thousand gloves because if the ASP is below that, it will be a very low margin and I don’t think that we will move into that direction. Due to the lower ASP, our customers are all making adjustments to their inventories,” he said.

He said customers were currently buying only a minimum quantity just to ensure that they could continue to meet their consumption demand.

"They are trying to consume from their high-priced inventories first before buying additional quantities. Because of this, we are not seeing the Covid-19 Delta variant causing a resurgence in demand.

"However, we do see the demand returning once the prices start to stabilise by the end of the year,” he added. — Bernama