October 2023
AMMEX > Resources > October 2023 Market Update
AMMEX > Resources > October 2023 Market Update
Disposable Glove Market Update
Disposable Glove Market Update
Disposable Glove Market Update
Disposable Glove Market Update
As we look forward to Q4 of 2023, the year has been a mixed bag of outcomes for disposable gloves. The pandemic boosted demand, and more gloves are used in North America than ever. At the same time, many large distributors and end users are still dealing with excess inventory, as prices have declined and challenges with labor, logistics, and factory utilization continue.
Plus, turbulence in the economy continues to be a distraction, with the Fed raising interest rates rapidly to battle inflation. The glove market, like the rest of the economy, is still working through post-pandemic challenges.
Despite the challenges mentioned above, the long-term outlook remains positive. Global growth in the demand for disposable gloves continues into its fourth decade and is expected to resume a double-digit annual rate in 2024.
EXCESS PRODUCT INVENTORY
Post-pandemic, too much inventory has been a problem across all industries. Disposable gloves are not an exception.
Many large distributors and end users bought disposable gloves at inflated prices during the pandemic, and are still dealing with excess inventory. Sure, they can reduce prices or write off product, but that is easier said than done when millions in forecasted profits are at stake. This has caused some large distributors to lose clients and even consider exiting the category. Most large-market participants will likely clear their inventory “overhang” in the next 6-12 months.
Curiously, there was some momentum for establishing a PPE stockpile to avoid the critical shortages of gloves in the future. A study from UC-Berkeley said that procuring an adequate PPE stockpile in advance at non-pandemic prices would cost only 17% of the projected amount at inflated prices in another crisis. However, that type of long-term thinking is not usually rewarded in the disposable glove market, so we expect most market participants to cut their inventory as much as possible.
Most insiders forecast the market to be closer to equilibrium within the next 12-18 months. Inventory will eventually normalize, and companies that stay in the market will aggressively look to recover lost business. Challenging conditions are likely to persist well into 2025, all while the global demand for gloves continues to rise, underpinned by rising hygiene awareness.
COST OF LOGISTICS
Costs of doing business in the disposable glove market seem to be leveling off after several years of big swings. United Parcel Service and the Teamsters reached a deal to avoid a costly strike by getting the raises the drivers wanted. Thus, higher labor costs will likely affect the price of most goods they transport. The International Longshore and Warehouse Union and Pacific Maritime Association also forged their own deal after months of labor strife; you can expect that to be factored in as well.
Container ocean freight rates oscillated dramatically between January 2020 and June 2023. In 2021, the market saw an especially steep increase in global freight rates, reaching an average price of $20,586 for a shipment from Asia to the U.S. West Coast. In June 2023, the global freight rate index stood at almost $1,500.
Those bargains did not last. The cost to ship goods from Asia to the U.S. have since turned upward—the average spot rate to ship a 40-foot container from China to the West Coast rose 61% during the six weeks through Aug. 15 to $2,075, according to transportation data and procurement firm Xeneta. The increase came as big shipping lines raised their listed prices after rates on the sector’s spot market plunged, as overstocked retailers pulled back orders.
As North America heads into the holiday season, both demand and volume are likely to increase—which could see costs rise due to the volatile price of fuel. There are also other factors, including drought that is slowing the ship traffic that carries goods in and out of the United States through the Panama Canal. Ships have had to watch their weight this year, which means reducing cargo volumes.
Freight operators are bracing for a weak peak shipping season this fall, as they hold down costs during the period when companies usually start rushing goods through supply chains ahead of the holidays in the second half of the year.
On the U.S. domestic front, gas and energy continue to be expensive. Qualified labor is in short supply, with strong competition for wages and hiring. Warehouse space is expensive, compared with historic trends.
Rising prices continue to be difficult to tame, thanks to high energy prices and hotter-than- expected economic growth. Inflation accelerated just 3.2% year-per-year, according to the July CPI report. But prices are likely hovering around the 5% range when considering those factors.This may keep interest rates higher longer. As a result, U.S. consumer confidence fell by the most in two years as souring views—related to higher borrowing costs and lingering inflation—curbed optimism.
Overall, inflation added around 20% to the cost of goods since the start of the pandemic, and the impact of that jump is uneven across industries and will take a while to work through within the economy. In short, going forward, very few things will cost the same as they did in 2019.
DISPOSABLE GLOVE PRODUCTION AND UTILIZATION
Most disposable glove factories prefer to run their production lines almost non-stop to make money. The concept is known as factory utilization. It is common that a factory needs a 50% utilization rate to break even. Throughout 2023, factory utilization rates for most of the industry have been well below 50% because of massive capacity added during the pandemic and high access inventory amounts at the end user level.
For example, Top Glove, one of the world’s biggest producers of disposable gloves, planned to double its annual capacity from 100 billion pieces to 201 billion by 2025, but scaled back expansion plans as its utilization rates hit below 30%.
Many industry insiders predict the utilization rate to bounce back to around 50% or higher in 2024-25. As mentioned, long-term industry prospects look fine, but there is plenty of short-term turbulence ahead.
Economic challenges in China are adding to the complexity of the situation. Whereas Malaysia and Thailand have dominated glove production for decades, China has emerged as a major player in the glove market. The economic slowdown in China may have a yet undetermined negative impact on glove production, possibly forcing Chinese manufacturers to cut capacity and raise prices.
CONCLUSION
As 2024 gets closer, the market continues to work itself out. Manufacturers, despite their gripes about profits perhaps not being where they would like, are settling in for the long haul.
Inflation and the threat of recession will continue to exert major influence. Transportation, especially on the domestic front, promises a bumpy ride, with inconsistent energy costs paving the way.
AMMEX continues to think long-term—our focus is on helping clients mitigate all types of challenges in the disposable glove market.
We help ensure product quality and consistency with 100% in-person inspections of all shipments. Our dedicated local team reviews each order at the factory level.
We offer 98% fill rates on top products to help ensure that our partners can get the glove they want when they need it.
We provide unmatched service and support. Our team moves quicker than competitors and has robust systems and processes in place to support clients of various shapes and sizes.
We ensure high levels of ethical sourcing and compliance. Our broad network and expert team help meet or exceed all established industry standards.
AMMEX has been providing the products and support necessary to grow clients’ single-use glove sales for more than 35 years. We will always help you select the right glove for the job.
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