Nitrile Glove Manufacturers See Decline in Margins as Pandemic Fear Fades
The sudden demand for nitrile gloves during the pandemic caused operating profits to soar for major glove producers, but the slowing demand for the gloves is now affecting margins. Nitrile gloves are made of nitrile butadiene rubber, which has excellent chemical resistance and water-resistant properties. The gloves have become a popular alternative to latex gloves as they are completely latex-free and prevent people from having allergic reactions.
Nitrile rubber is one of the major raw materials that go into the production of nitrile gloves, and it plays a critical role in their cost. The price of nitrile rubber was volatile in nature during the past three years, leading to a sudden spike in the price of nitrile gloves, especially during the pandemic. The glove manufacturers saw their operating profits reach over 50% during 2021 and 2022, due to the sudden demand for examination gloves from the medical industry because of COVID-19.
Nitrile gloves are used in various industries, including the medical industry as examination and surgical gloves, the automobile industry for their strength, and the FMCG sector for their chemical-resistant properties. The manufacturing process of nitrile gloves is highly automated and involves dipping ceramic hands in a nitrile rubber mixture, which determines the thickness of the gloves.
The rising price of natural gas is a cause for concern, as it will increase the utility cost and affect the pricing of nitrile gloves. A single glove requires 0.00812 Kwh of electricity and 0.00034 MMBtu of natural gas. Malaysia, one of the largest manufacturers of gloves, saw a 24% increase in the price of natural gas, which will affect the prices of nitrile gloves by around 1% to 1.5% of the production cost.
The usage of nitrile gloves is high across the USA and Europe, whereas the usage of nitrile gloves across Africa, Asia, and South America accounts for just 1/5th of the total consumption worldwide. The demand for nitrile gloves from these regions is expected to increase, creating more opportunities for glove manufacturers and helping to stabilize prices.
As the fear of the pandemic fades, the demand for nitrile gloves has slowed down, affecting the margins of manufacturers. The nitrile rubber prices is expected to reduce in the coming quarter, which will nullify the natural gas price rise, and the supply-demand gap is expected to be reduced. However, Chinese manufacturers are pushing low-priced gloves into the market, which is worsening the financials of Malaysian glove makers who saw 50% margins during the peak of COVID-19. Customers can bargain with their suppliers to offer reduced prices as the market is becoming more competitive, but the supply-demand gap is expected to take a few more months to fulfill.
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