SEPANG: Hartalega Holdings Bhd still sees increase in demand from the United States market and expects it to remain strong in the coming years, despite the ongoing trade war between US and China,
However, managing director Kuan Mun Leong said the glove maker will remain cautiously optimistic on the global supply chain of gloves, as it sees Chinese glove manufacturers diverting to other markets globally, especially in Europe to avoid additional tariff imposed from the United States.
“We need to pay attention as the Chinese manufacturers are losing its market in US, which in turn would make them find other markets like in Europe and Japan to sell their products,” he said at the company’s annual general meeting here today.
Kuan said the US market accounted for 54 per cent of Hartalega’s sales revenue in the financial year ended March 31, 2019 (FY19) from total sales of 29 billion pieces of gloves.
“The group was prepared for this heightened competitive pressure resulting in new capacity growth overtaking demand growth.
“We believe the market is readjusting and global demand for rubber gloves continues to increase,” he added.
Hartalega exports markets include Europe (25 per cent), Asia Pacific (18 per cent), and South Africa (3.0 per cent).
Chairman Kuan Kam Hon said the trade war has yet affect the company but it would require about six months to revaluate the impact in terms of pricing.
“But it is very unlikely for the US to impose additional tariff for Malaysian manufacturers, otherwise the cost of healthcare in the country would be expensive,” he said.
On September 1, both China and US had started imposing additional tariffs on goods in the latest heightened of their trade spat, as China imposed levy on US crude oil while the Us implementing 15 per cent additional tariffs on US$125 billion in Chinese imports.
Hartalega currently exports 90 per cent of its medical gloves products to the US market
Meanwhile, the company is on track to meet the demand growth as its expansion plans progress via the Next Generation Integrated Glove Manufacturing Complex (NGC).
“Plant 6 and Plant 7 are expected to be completed over the next three years. We are also focused on driving productivity and enhancing operational efficiency with the implementation of Industry 4.0 and Internet of Things technologies,” he said.
Kuan said Hartalega’s NGC complex would increase its production capabilities from 34 billion pieces of gloves per year to 44 billion pieces annually.
“Our utilisation rates are about 95 per cent from 88 per cent previously.
“We expect it to be fully operational by this year end due to higher demand,” he said.